November 13, 2018 / 8:04 AM / a month ago

UPDATE 1-Metal traders head to Shanghai for copper conference amid trade war worries

* Global copper industry descends on Shanghai for annual meeting

* LME copper prices down around 17 pct in 2018 on trade war fears

* Miners, smelters in talks over 2019 copper TC/RC benchmark (Adds detail on treatment charge negotiations, copper concentrate imports)

By Tom Daly

SHANGHAI, Nov 13 (Reuters) - Metals traders are arriving in Shanghai for the annual Asia Copper Week event, gathering in China at a time when the outlook for demand in the world’s biggest consumer of the commodity is clouded by the Sino-U.S. trade war.

Prices for copper, widely used in wiring and construction, have fallen around 17 percent in 2018 amid fears the trade spat will undermine demand for industrial metals. They are set for their worst year since 2015, snapping a two-year revival.

“Asia Copper Week will be an important event this year as the copper industry faces a number of challenges,” said Vanessa Davidson, director of copper research and strategy at CRU, citing Chinese restrictions on scrap imports and the need for mine investment.

China this year tightened thresholds on impurities in scrap metal imports and slapped a 25-percent tariff on scrap material from the United States, one of its top suppliers, in August.

China’s imports of unwrought copper and copper concentrate both fell by 18.7 percent month-on-month in October, albeit from bumper September volumes.

A copper fabricator in southern China, who supplies tubes to white goods manufacturers, said orders for his products had dropped sharply over the last two months.

“Our expectations for next year are not too good either,” the fabricator said, declining to be identified as he was not authorised to speak with media.

However, two China-based traders said they had seen strong physical buying of copper despite the anticipated headwinds.

“The macro data aren’t great but some traders are buying copper aggressively,” one said. China’s GDP grew at its slowest pace since 2009 in the third quarter.

Asia Copper Week, organised by Chile’s Center for Copper and Mining Studies (CESCO) and the China Nonferrous Metals Industry Association (CNIA), includes a conference and seminars, with contract discussions taking place on the sidelines.

TIME TO NEGOTIATE

The October copper concentrate import volume was the lowest in six months, potentially signalling a slowdown in China’s demand as miners prepare to negotiate with the nation’s copper smelters on treatment and refining charges (TC/RCs) for 2019 in Shanghai.

The fees, paid by miners to smelters to process ore into refined metal, fall when there is insufficient ore supply to meet demand. Miners will argue that will happen next year as Chinese smelting capacity expands and as mine supply growth is limited.

A source with a major miner played down the prospects of the TC/RC benchmark being settled this week. “This is just the first round of talks,” he said.

A source with a major Chinese smelter, however, said he expects mine supply to grow by 2 percent next year, versus 1 percent growth in smelting capacity. “More environmental problems globally will curb the smelter production, especially in China,” he said.

Still, strengthening smelters’ hands, this year, the market has seen several smelter disruptions, noted BMO Capital Markets analyst Colin Hamilton.

The 400,000 tonne Sterlite smelter in India was ordered shut in May and China’s Northern Copper Industry Co has just closed its 50,000 tonnes Houma smelter for a two-year revamp, three company sources said. Northern Copper did not respond to a request for comment.

“Perhaps the simplest thing for all to do would be to shake hands and roll over (last year’s) terms (for 2019),” Hamilton said in a note.

The 2018 TC/RC benchmarks were set at $82.25 per tonne and 8.225 cents per pound respectively. (Reporting by Tom Daly; Additional reporting by Pratima Desai in London and Melanie Burton in Melbourne; Editing by Joseph Radford)

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