Codelco, the world's largest copper producer, responsible for about 10% of the world's copper production, is ending long-term contracts to sell copper concentrate to Chinese clients from 2025. This is in an effort to broaden its product offering to them and to reduce uncertainty about whether it can meet its contractual obligations. Codelco's main customers are in China, Japan, and South Korea.
Chinese customers have protested against the changes but will have to accept new contract negotiations that include intermediates because they will need Codelco's concentrates at a time when deficits are expected.
Codelco's production has been slipping in recent years, despite significant investments (~$15 billion) in flagship mines. This is due to a number of factors, including operational problems and rising costs.
Codelco accounts for 29% of Chile's copper production. Chile's congressional committee in late August launched an investigation to review Codelco's corporate structure and project delays.
China is the world's biggest buyer of mined copper with its import volume accounting for over 60% of the world's total. The world's largest consumer of industrial metals bought 25.3 million tonnes of copper concentrates last year, according to International Copper Study Group.
The global copper concentrate market is expected to see a steep deficit during 2025-2027 as Asian and African smelters ramp up capacity, outpacing mine supply.Implications of the article:
The decision by Codelco to end long-term contracts with Chinese clients is a significant development in the global copper market. It could lead to higher prices for copper concentrate in the coming years, as Chinese smelters compete for a limited supply.
The article also highlights the challenges facing Codelco, which is struggling to maintain its production levels. This could also lead to higher copper prices in the long term.
Overall, the article is important reading for anyone interested in the global copper market. It provides insights into the latest developments and trends, and the implications for businesses and consumers.
All sounds like perfect timing for when AW1 Storm Copper product comes to the market. We could benefit in relation to higher Copper Direct Shipment Ore sales prices to Chinese or global copper smelters and improved investment in the sector for the project's shallow and deep copper resource development,
AW1 Price at posting:
26.0¢ Sentiment: Buy Disclosure: Held
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