Commentary: Copper benchmark deal signals shifting supply dynamics in 2019 – by Andy Home (Reuters U.K. – November 22, 2018)

LONDON (Reuters) – Copper supply has surprised this year, but not in the way everyone expected. It was supposed to be a year of mine disruptions, with the market anticipating that multiple labour contract expiries would result in at least one strike, and possibly more. In the event there was none.

By copper’s standards it has been a remarkably smooth year for mine production, leaving analysts struggling to fill the customary collective allowance for disruption in their forecasts.

There has been plenty of disruption, but it has taken place at the smelting-refining stage of the copper production chain, roiling the refined metal market and allowing smelters to feast on a rare abundance of raw materials.

This dynamic looks set to change again next year, judging by the benchmark copper concentrate terms set by Chilean miner Antofagasta and China’s Jiangxi Copper. The headline deal between the two companies for 2019 is for Jiangxi to receive a treatment charge (TC) of $80.80 per tonne and a refining charge (RC) of 8.08 cents per pound for converting Antofagasta’s concentrate into refined metal.

That is down from this year’s benchmark terms of $82.25 and 8.25 cents and marks the fourth consecutive year of falling treatment charges. Whether they are really “benchmark” terms is questionable since the whole annual benchmark system for pricing copper raw material is evolving.

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