Surplus of concentrate may prove short-lived

The market for copper concentrates has moved firmly into surplus, owing to a sharp rise of just over 4.6% in global concentrate output. The surplus comes after a 3-year period during which time inventories were drawn down. The change is being reflected in spot treatment and refining charges, which, since late 1994, have virtually tripled to more than US30 cents per lb. on a contained basis.

According to Brook Hunt, mining and metal industry consultants, the 5.5% increase in world concentrate output forecast for next year will be accompanied by a much smaller rise of only 3.3% in global smelting capacity. This means that smelters will enjoy abundant supplies of concentrates during 1996.

Brook Hunt predicts that term smelting and refining charges are certain to rise in the Far East, by about 36% over the base terms agreed for 1995. However, custom smelters are advised to make the most of this windfall, as it is likely to be short-lived.

During 1997 and 1998, a wealth of additional global smelting capacity will be commissioned, mainly in China, India and Indonesia. As well, smelters in Chile, Mexico and Peru are increasing their refining capacity. The firm has been monitoring expansions and new projects in China, and expects the country will become an increasingly important player in the custom concentrates market, possibly overtaking Germany as the world’s second-largest buyer, after Japan.

Brook Hunt’s latest study, Global Copper Concentrate and Blister/Anode Markets to 2005, concludes that future treatment and refining charges are unlikely to sustain a level which would support greenfield projects.

The study concludes that spot refining charges in the custom blister market will fall next year as the scrap market tightens in response to lower copper prices.