Copper Markets

How and where copper is traded.

Copper Metal Market

The international Copper market is based on basically three metal markets around the world:

  • The London Metal Exchange (LME)
  • Shanghai Futures Exchange (SHFE)
  • Commodity Exhange Inc (COMEX) part of New York Mercantile Exchange (NYMEX)

Of these, the LME is the biggest. Each metal exchange is associated by their respective inventories, LME copper inventory, Shanghai copper inventory and COMEX copper inventory, which track their current stocks. Again, the LME inventory is considerably bigger than the two others.

Copper Concentrate Market

To understand the copper trading business it is necessary to understand the role of the customers of the copper concentrate. These are the smelters and the refiners.

Copper concentrates are sold for their respective copper content. The presence of auxiliary metals such as gold and silver are paid a surplus.

Concentrate producers sell a concentrate powder normally containing 24% - 40% copper metal content to the smelters and refiners, with the market averaging around 27%. Each concentrate seller has its own special formula, but generally the terms are as follows:

The smelter pays the producer typically 96 to 97 % of the metal value based on metal content contained in the concentrate and based on a future average price known as the quotational price less the:

  • Treatment charges ("TCs") and
  • Refining charges ("RCs")

TCs are charged on a $ per tonne of concentrate treated and RCs on a Cent per pound of metal refined. The charges fluctuate with the market but are often fixed on an annual basis.
Typical prices are given in the table below:

Copper TCs/RCs TCs (USD/MT) RCs (Cents/pound)
2010 46.5 4.65
2011 60-80 6-8
2012 63.5* 6.35*

*Estimated 2012 figures

By-product metals such as gold and silver have separate refining charges. In addition, the smelters and refiners require concentrate specifications that limit the amount of impurities allowable in the concentrate (for example arsenic, which the Nussir ore does not contain) and these limits vary from smelter to smelter.

Nussir does not expect any penalties for its very clean copper concentrate.

If the concentrate producer does not meet these specifications financial penalties are levied. Samples are taken of the concentrate during the shipping of concentrate to a smelter and determine the level of payable metal, moisture and impurities in the concentrate. If there are disagreements between the concentrate producer and the smelter as to the assay results they are usually settled by a third party umpire.

Concentrate Trade Timeline

The timing of the quotation pricing, payments and final price settlement between the concentrate producer and the Smelter Refiner generally works as follows:

Production of concentrate           DOS – 1 to 2 months
Concentrate is shipped to smelter (Date of Shipment – DOS)      DOS
Provisional payment made by smelter* DOS + 1 months
Quotation period (final month of pricing)**        DOS + 4 months
Third party settlements if necessary       DOS + 5 months
Final settlement payment            DOS + 6 months
* Based on spot prices and 90% of estimated metal content
** Usually the average metal exchange price during the quotation month

As result of the long time period between mine concentrate shipment and final settlement payments most concentrate producers have a certain working capital element.

Nussir in the Concentrate Market

The concentrate produced at the Nussir site will probably be shipped between five to ten times per year depending on the distance to the customer and the customer’s wishes. It is too early to say where it would be shipped, but copper smelters can be found in many countries and regions around the world. Most of these however treat and refine only from their own mines, just a few buy concentrate in the market.

 

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