China Copper `Anxiety’ Has Top Miner Thinking of Early Sales
(Bloomberg) -- China is so hungry for copper that the biggest producer of the metal is looking to bring forward its annual sales program.
Negotiations between Chilean state-owned producer Codelco and customers in China could start as many as two months earlier than the traditional October-November period, Chief Executive Officer Nelson Pizarro said Monday in an interview from the company’s Santiago headquarters.
“We are seeing a lot of anxiety,” Pizarro said. “In the 2016 campaign we sold all our copper in four days. I think now we will sell it in half a day.”
The price of the metal used in wiring and plumbing is trading near four-year highs as producers struggle to keep up with demand that’s been given a further boost by new energy systems and the rechargeable-battery revolution.
While Chinese refineries have raised the fees they charge to treat semi-processed copper in recent months, suggesting the market has become better supplied, those fees could start coming down, Pizarro said. A 37 percent increase in Chinese copper raw-material imports in May from a year ago may be part of a reaction to an announced ban on foreign scrap.
“The signs we are seeing from China are definitely positive,” Pizarro said. “Their smelting capacity is very high, not so much their concentrate supply.”
Codelco expects to ship 190,000 metric tons of copper in concentrate to China this year, its main market in that category. More than 60 percent of Codelco’s shipments to China are in cathodes, a type of refined metal. High arsenic levels in Chilean concentrate means that the company needs to treat it before exporting.
Copper prices jumped last week as the start of wage talks at the giant Escondida mine spurred speculation of a repeat of last year’s prolonged strike. Prices, now trading at about $3.25 a pound, may remain between $3.20 and $3.40 for the rest of the year, he said.
In April, Codelco’s production fell to the lowest in more than a year, according to a monthly report from Chile copper commission Cochilco. The slump is explained by a fire, a strike contingency plan prior to wage talks and rough seas that affected ports, Pizarro said.
Still, the company is on track to meet its annual production projection, which is slightly below last year’s level, he said.
Codelco is focused on keeping debt levels at about $14 billion and any new bond sales for refinancing would depend on market conditions.
Pizarro is "very confident" that the Chilean government will provide the $633 million funding that the company needs this year. "We should receive news on this soon," he said.
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