Copper concentrates dislocation likely to mean smelter cuts, Codelco chair says: LME Week

In an interview during the annual London Metal Exchange industry week, Maximo Pacheco told Fastmarkets that those closures would be closely linked to smelters with a sizeable exposure to the spot market.

“We interpret the current condition of the concentrates market as a dislocation from both sides of the equation. First, there is lower availability of concentrates in the market, but it also represents some excess capacity in the smelting business,” Pacheco said.

“We have not heard firm news about closures yet, but we understand that some of the smelters that are more exposed to the spot market are even more likely to close,” he added.

But Pacheco said that it was important to bear in mind that smelters in China were very cost-competitive, meaning that, even in the current market conditions, “they still have some level of resilience that will allow them to continue to operate and meet their production targets.

“We could also see cuts elsewhere in the rest of Asia, depending on the level of exposure to the spot market,” he added.

Copper smelters typically have some percentage of copper concentrate contractual supply tied to annual benchmark treatment charges (TCs), which were agreed in November last year between Antofagasta and China’s Jinchuan Group at $80 per tonne for 2024.

But the spot market has changed considerably since then, because supply tightness has worsened.

Fastmarkets most recently calculated its weekly copper concentrate TC index, cif Asia Pacific, at $2 per tonne on Friday September 27, up from $(1.90) per tonne a week earlier.

TCs are the fees that mining companies pay to smelters to have their semi-processed ore, or concentrate, turned into finished metal. Typically, tighter spot supply leads to a drop in spot TCs.

Benchmark negotiations for 2025 were currently under way.

Pacheco said that while expectations were for the parties to agree a lower number than for 2024, it was not clear what that number would be.

“For miners, and for Codelco, it is very important to have a healthy supply chain,” he said. “We’re not here only for the short term; we care about the long term and the effect of the tight industry conditions.”

How smelters would approach the talks was also uncertain, he told Fastmarkets, particularly in terms of the level of spot market exposure they would seek.

“If spot TCs are very low and the benchmark is very low, some smelters may want to wait and see what happens with the spot market,” he said. “Others might say, okay, maybe this level is bad, but it could be worse, so we are going to secure supply now.”

Codelco has been supplying the Chinese market for decades, Pacheco said, but has also been expanding its client base in South Asian markets, including India.

“Our commercial strategy is two-pronged. One of them is pursuing flexibility – we need flexibility to move in a volatile market,” he said. “But at the same time, we understand that value creation is a long-term process, so that means we value long term relationships with clients.”

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