September 25, 2017 / 8:35 PM / a year ago

UPDATE 1-Copper market fundamentals point to lower refining charges -Antofagasta CEO

(Adds Arriagada comments on copper prices, background on global copper smelting capacity, Reuters poll on copper deficit)

SANTIAGO, Sept 25 (Reuters) - Tighter copper supply and an increase in refining capacity in top-consumer China should result in lower treatment and refining charges (TC/RCs) by smelters, the chief executive of Chilean miner Antofagasta PLC told Reuters on Monday.

“The fundamental market conditions are indicative of a deficit and that should mean that the TC/RCs fall. That’s the logic that should prevail,” Ivan Arriagada told Reuters on the sidelines of an event.

Last week, sources told Reuters that China’s largest smelters had raised their minimum charges to turn concentrate into refined metal by up to 10 percent for the fourth quarter, more than most traders had expected.

Treatment and refining charges serve as an indicator of copper smelters’ profits, with higher charges seen as a sign of an abundant supply of copper.

But Arriagada said the expansion of Chinese capacity, in addition to production lost to strikes at Chile’s Escondida and Indonesia’s Grasberg mines had resulted in a shortage of copper concentrate.

Analysts polled by Reuters in July expected a global copper deficit of 44,000 tonnes in 2017, up from 17,000 tonnes in a poll in May due to the impact of the strikes.

While Chile is the world’s largest copper producer, followed by neighboring Peru, 48 percent of global copper smelting capacity is in Asia, mostly in China and Japan, according to the Thomson Reuters Eikon Metals Fundamentals Database.

There are seven copper smelters currently operating in Chile, representing about a tenth of global capacity of 20 million tonnes. Most are run by state-owned Codelco; Antofagasta does not operate any smelters.

Arriagada told reporters earlier that copper prices would remain volatile in the short term, even though they were likely to consolidate around current levels in the medium to long term.

Three-month copper on the London Metal Exchange closed down 0.1 percent at $6,450 per tonne on Monday after touching a one-month low on Friday.

“We might expect lower prices in the short term, but we think copper in a sense now has a new floor. It’s hard to see it falling below $2.50 (per pound, or $5,512 per tonne),” Arriagada said.

Prices last approached those levels in May. Since then, they have surged 18 percent. (Reporting by Fabian Cambero; Writing by Luc Cohen; Editing by Bernadette Baum and Susan Thomas)

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