Copper treatment charges in China fell to the lowest in over a decade as domestic producers failed to implement the required voluntary production cuts. The spot treatment charges in China fell to US$19.8/t this week, the lowest since 2013, according to Fastmarkets data. China’s refined copper output surged to a record high in December after the country’s expansion of its smelting and refining capacity. The shift is largely driven by China’s strategic need for copper as demand from the green energy sector grows for the red metal. The increase in smelting is making China less dependent on imported copper metal. This might lead to an oversupply of refined metal, which sets the LME price. Annual contracts between smelters and miners were set at US$80/t for 2024, a decline of 9% year-on-year. Treatment charges are a key sign for the future direction of copper. This marked the first decline in treatment and refining fees in three years and followed a six-year high set for 2023.
Prices of most of the industrial metals trading at the LME ended lower yesterday as the expected pick-up in demand in China post-Lunar holidays has so far disappointed. LME copper prices led the declines among base metals yesterday, with prices falling over 1% DoD at the close as exchange inventories rose along with a slow recovery in Chinese demand. China’s refined copper has been trading at a discount of -30CNY/t (the highest discount in almost a month) reflecting slowing domestic demand.
Meanwhile, exchange inventories for copper reported inflows of 4,925 tonnes (the biggest daily addition since 5 December) for a second straight session, with total inventory rising to 127,825 tonnes as of yesterday, according to the recent data published by the LME. The majority of the inflows were reported from warehouses in Rotterdam. Meanwhile, on-warrant stocks rose by 4,375 tonnes to 105,250 tonnes as of yesterday. The cash/3m spread for copper slipped into a deeper contango of US$104.5/t as of yesterday, compared to a contango of US$92.5/t a day earlier, indicating ample supply availability in the physical market.
