Copper mine disruptions cut supply, treatment charges

MELBOURNE (Reuters) - Disruptions to copper shipments from Canada and Chile have undermined expectations for rising global copper supplies in the second half of the year, cutting the charges that smelters charge miners to process metal.

A mechanical shovel scoops up rocks to be loaded onto waiting dump trucks during a normal work day at the Chuquicamata open pit copper mine in northern Chile, in this April 1, 2011 file picture. REUTERS/Ivan Alvarado/Files

Treatment and refining charges copper (TC/RCs), a closely watched indicator of copper supply, have turned lower in recent weeks. A drop in TC/RCs signals that smelters have been forced to drop their rates to attract feed, an indication of a scarcity of mine supply.

Copper treatment charges have fallen to $79-$81, two traders said, from $83 at the end of May and $88.40 at the beginning of the year.

This is well below expectations of the China Smelters Purchase Team (CSPT), which sets a TC/RC floor price for the country’s major smelters. The CSPT had raised its floor price for the third quarter to $86 a ton and 8 cents a pound, up from $80 a ton in the second quarter, three sources said.

“(The spot fee) is a number that is lower than I would have anticipated and than the market expected at the start of the year,” said Ivan Szpakowski, Chief Investment Officer of Academia Capital, a U.S.-based emerging markets and commodities-focused hedge fund.

“It makes me question whether the concentrate supply this year may be a bit less than the market anticipated.”

Wildfires in Canada and rough swells off the coast of Chile have disrupted shipments of copper concentrate to plants in China and Japan this month, allowing sellers to negotiate cheaper treatment fees, two sources with direct knowledge said.

Meanwhile, an estimated 5,000 workers at the giant Grasberg copper mine operated by Freeport-McMoRan Inc’s Indonesian unit will extend their strike for a fourth month, a union official said on Friday.

The global market for copper is increasingly seen close to balanced this year, from expectations of a surplus at the start of the year, after the Indonesian strike and contract negotiations at Chile’s Escondida interrupted supply from the world’s top two mines.

The global market deficit for refined copper widened in April to 53,000 tonnes, from 18,000 tonnes in March, the International Copper Study Group (ICSG) said. For the first four months of the year, the market was in an 80,000 ton surplus compared with a 185,000 ton deficit the year before.

Reporting by Melanie Burton; Additional reporting by Tom Daly in Beijing; Editing by Richard Pullin