SHANGHAI, Nov 20 (Reuters) - Jiangxi Copper Co , one of China’s biggest copper smelters, needs treatment and refining charges (TC/RCs) of around $75 a tonne and 7.5 cents a pound to avoid losing money, its vice president of trading said on Wednesday.
“We hope [the TC] is higher than $75, otherwise we will make a loss,” Xu Yuanfeng told reporters, adding that the company was currently losing money and that prices for sulphuric acid, a byproduct of copper concentrate smelting, were also low, “which will reduce our profits and add more pressure.”
Xu made the comments on the sidelines of the Asia Copper Conference. Smelters including Jiangxi Copper are negotiating this week with miners to set an annual TC/RC benchmark for 2020.
The TC benchmark is referenced in miner-smelter contracts worldwide and plays a big role in determining the profitability of both sides. It is $80.80 a tonne for 2019 but current spot levels are around $60, pointing to a much lower benchmark next year.
Miners pay the charges to smelters to process copper concentrate into refined metal. TC/RC prices tend to rise when copper concentrate supply is abundant and fall when the supply tightens.
Xu said basically all of Jiangxi Copper’s imported copper concentrate was sourced on long-term contracts, meaning the company’s exposure to the spot market is small and underscoring the importance of a favourable settlement with miners this week.
Javier Targhetta, senior vice president for marketing and sales at miner Freeport McMoRan Inc, said on Tuesday that he thought a “reasonable” benchmark for 2020 would be $60.
Speaking in a panel session at the conference, Xu said copper miners and smelters were part of a community with a “shared destiny” and should work together more to develop more applications for copper. “Mines should not be willing to see their partners suffering a loss,” he said.
Jiangxi Copper will not be importing more copper concentrate due to China’s restrictions on scrap since the company only imports “a few thousand tonnes” of copper scrap per month, but quotas issued for imports were “not enough”, he told reporters.
China has so far issued import quotas for around 550,000 tonnes of high-grade copper scrap since restrictions were tightened from July this year. (Reporting by Tom Daly; Editing by Christian Schmollinger)