Copper output in China is set to remain at record levels for the rest of 2013 as high treatment fees encourage smelters in the biggest producer to run at full capacity.
Monthly production in the fourth quarter may be about 560,000 metric tons, matching an all-time high in August and above average output of 534,112 tons for the first eight months, said Yang Changhua, an analyst at Beijing Antaike Information Development Co.
Higher output and imports that reached an 18-month high in September may add to a global glut. The metal in London tumbled into a bear market in April and has dropped 8.6 percent this year as economic growth slowed in China, the largest user.
“Smelters are willing to produce because of high treatment charges and ample ore and scrap supplies,” Yang, who has studied the market in China for 15 years, said in a phone interview yesterday.
The short-term fee for treating ore has climbed further this month after reaching $100 per ton in September, supporting high utilization rates from Chinese smelters, said Zhu Wenjun, an analyst at SMM Information & Technology Co. in Shanghai.
Metal for delivery in three months on the London Metal Exchange was little changed at $7,255 a ton at 9:49 a.m. in Shanghai.
Zhu expected China’s National Bureau of Statistics to announce later this week that refined copper output in September may match a record 580,000 tons set in December.
Antaike, a unit of the China Nonferrous Metals Industry Association, accounts industry data with different standard beside the Chinese authority.
China imported 940,000 tons of ore and concentrate in July, matching a record seen in December. The figure retreated to 750,000 tons in August. Concentrate is semi-processed ore.
High imports have driven up concentrate inventories at Chinese smelters by 150,000 to 200,000 tons from earlier this year, SMM’s Zhu said, citing an estimate based on her company’s survey with the plants.
Higher inventories of semi-processed ore are driving up charges levied by smelters to treat the metal, Freeport-McMoRan Copper & Gold Inc. (FCX:US), the world’s second-largest copper miner, said on Oct. 8.
“The situation helps maintain the current level of spot fees and offers Chinese smelters a relatively good bargaining position in annual fee negotiations,” Zhu said.
Treatment fees are in dollars per ton of concentrate received and refining fees are in cents per pound of copper in the ore. The charges are deducted from prices paid by smelters to mining companies for concentrate.
Smelters including China’s Jiangxi Copper Co. and Hamburg-based Aurubis AG (NDA) expect higher fees next year as mining companies have more supplies for smelters to process following mining capacity expansion.
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