Asian copper concentrate demand should remain underpinned in the third quarter by strong margins and a growing Chinese smelter production capacity, though clean copper concentrate output is expected to lag consumption, continued downward pressure on the country’s treatment and refining charges.
Tight Copper Concentrate Supply Pushes Down TC/RCs as Smelters Ramp Up
Treatment and refining charges (TC/RCs) for copper concentrate have fallen sharply, signaling tight supply conditions amid surging demand from Chinese smelters that resumed production in Q2.
Chinese Smelters Drive Demand Spike
- Yanggu Xiangguang Copper resumed operations in late May and reached 90% capacity (500,000 mt/year) by June.
- Daye Nonferrous is expected to start a new 400,000 mt/year line in August, increasing procurement pressure further.
High sulfuric acid prices supported smelter margins in Q2, encouraging sustained high production rates.
Supply Constraints from Latin America
Key global producers faced challenges:
- Chile: Copper concentrate exports dropped 13% YoY (Jan–May) due to water shortages and declining ore grades.
- Peru: Labor strikes disrupted output at Las Bambas and Southern Copper's Cuajone and Toquepala mines.
The delayed launch of the Quelleveco mine in Peru also pushed expected supply relief to Q3.
Market Impact and Spot Market Activity
According to S&P Global Commodity Insights, clean copper TC/RCs fell to a three-month low of $73/mt CIF China by June 29, down 14% since mid-April. A Q3 low is expected before possible Q4 recovery.
- The Platts producer-trader TC differential widened to -$14.60/mt on June 29, the largest gap of 2022.
- Spot trades by traders accounted for 33% of Q2 activity, up from 25% in Q1.
- 220,000 mt of blended concentrates traded in Q2, nearly double Q1 levels.
Chinese smelters bought additional non-standard material, including Mongolian, Kamoa (DRC), and Grassberg concentrates with higher impurity levels, especially from small- to mid-size producers.
Downstream Demand Uncertainty Weighs on Cathode
Despite the reopening of Shanghai, copper cathode spot liquidity may remain weak into Q3:
- China's refined copper imports dropped 9.3% YoY in April.
- ShFE copper stocks surged 236% YoY by March 1; LME stocks rose 66% in Q2.
- LME copper fell below $9,000/mt in June as global macroeconomic pressures lingered.
While May saw some recovery in spot arbitrage due to easing lockdowns, real demand from construction and appliance sectors in the US and EU remains sluggish. Elevated inflation and high interest rates continue to suppress copper consumption.
Traders are cautiously optimistic that Q3 could see renewed activity, particularly if Chinese government stimulus packages successfully reignite domestic demand amid weaker exports.
