Physical Copper Markets Might Tighten More in 2019



Copper markets

Previously, we discussed some Chinese copper demand indicators (SCCO). China’s copper demand indicators don’t look as strong as what we saw at the beginning of 2018. End consumers like the construction and automotive sectors have shown signs of moderation.

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Copper TCs (treatment charges) and RCs (refining charges) are seen as indicators of physical markets. TCs and RCs are a charge that copper smelters receive to process copper concentrate. Since these charges are settled directly between copper producers and refiners, they tend to reflect physical market sentiments.

Lower TCs and RCs are usually associated with tight copper concentrate supply. According to Reuters, Jiangxi Copper, a Chinese smelter, and Antofagasta (ANTO) have agreed on 2019 TCs and RCs at $80.80 per metric ton and 8.08 cents per pound. The charges are lower compared to the 2018 benchmark.


Despite resilient copper supply in 2018, we have seen some tightness in copper markets and inventory levels have fallen sharply. Higher Chinese unwrought copper imports and copper concentrate imports have helped copper markets in 2018. After a strong year, we saw a sharp decline in China’s copper imports last month.

Freeport-McMoRan (FCX) expects its copper shipments to fall next year. Some of the other miners like BHP Billiton (BHP) are also dealing with falling ore grades at their aging mines. Copper’s positive long-term outlook amid the expected supply deficit has helped the metal maintain the $6,000 per metric ton level amid the equity market sell-off.

Next, we’ll discuss Freeport-McMoRan’s 2019 outlook.


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