(MENAFN - Gulf Times) Chinese copper smelters and global miners have suspended their talks to set benchmark annual fees for ore processing in 2018 and agreed to study the market further before the next meeting, according to a smelter official with knowledge of the matter on Friday.
No timetable has been set for new discussions, said the official, who asked not be identified because the information isn't public. The two sides were meeting in Shanghai during Asia Copper Week, a series of events where the industry gathers to debate the outlook for the global market.
The negotiations are taking longer than in previous years, Ivan Arriagada, chief executive officer of Chilean miner Antofagasta Plc, said in an interview on Thursday. Jiangxi Copper Co said the same day the talks were deadlocked.
Ore concentrate is in short supply and that should spur a drop in the treatment and refining charges that miners pay smelters for processing the material, according to Arriagada. Chinese smelters say are facing higher costs as they upgrade facilities to comply with environmental rules, and fees should leave some room for profit to ensure a healthy industry.
'It's obvious for us that there's a shortage of concentrate for supply to China, while there's been a sustained expansion in smelting capacity in the country, Arriagada said. 'The economics dictate that the price should go lower.
A global recovery and tight mine supply have helped drive an increase of more than 20% in prices of refined copper this year, which follows an 18% gain in 2016, and would be best year since 2010. Chinese production of refined metal has also been increasing, rising about 6% to a record in the first 10 months as smelters build out capacity.
'We understand the pressures that Chinese smelters have in terms of increasing costs and environmental regulation, Arriagada said. 'But we cannot deny the reality that capacity in China has been increasing at a fast rate.
Wu Yuneng, vice president of Jiangxi Copper, said on Thursday that one of the issues was that traders had offered low treatment fees in the concentrate market, which caused a difference in views on ore's supply and demand balance. Wu said the ore market is basically balanced, while China's environmental drive is set to reduce smelter output.
This time last year, Jiangxi Copper agreed to cut fees for 2017 as Chinese smelting capacity expanded and mine supply was expected to be little changed. The smelter settled at $92.50 a metric ton to treat concentrate and 9.25 cents a pound to refine metal.
Other points from the Arriagada interview on Thursday: Chinese demand growth next year seen at 3-4% from 4-5% this year.
Compared to the mood at LME Week, 'what we're seeing is a bit more moderation. The expectation is that growth will continue but looking into next year, rates will moderate.
'These rates are healthy, we're talking about a substantial addition of physical metal required to meet these demand needs.