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China’s copper buyers flex muscles in Codelco contract negotiations
Reuters | October 11, 2023 | 

(Image courtesy of Codelco | Flickr.)

Russian copper exports to China and expectations of surpluses have emboldened Chinese buyers to try and dictate how much they will pay to Codelco for the industrial metal next year, industry sources say.


While European buyers have shunned Russian copper following Moscow’s invasion of Ukraine last year, traders and consumers in China, accounting for around half of global consumption of the metal used widely in the power and construction industries, continued to buy Russian metal.

The ample supplies give Chinese buyers an advantage in upcoming negotiations with Chile’s Codelco, the world’s largest copper producer, for the premiums they expect to pay above the London Metal Exchange benchmark price, the sources said.

“China isn’t looking great, there is no shortage of material. Codelco might be able to impose premiums in Europe, but not in China,” a copper industry source said.

According to sources with knowledge of the matter, China’s largest copper buyers expect to pay a premium of around $90 per metric ton next year for Codelco’s metal, 36% below what they are paying this year.

Meanwhile in Europe, Codelco has offered to sell copper at a premium of $234 a ton to clients next year, matching this year’s record after consumers in the region declined to renew Russian contracts and looked for alternative sources.

“Codelco isn’t in a good negotiating position with China,” another copper industry source said.

Codelco’s London office has not responded to requests for comment.

Industry sources say significantly lower shipping costs to China from Chile and rising output in China at 7.75 million metric tons in the first nine months, up 12.7% from the same period in 2022 were also important.

Last week, chairman Maximo Pacheco told Reuters that China remained an important market for the miner, accounting for 40%-45% of Codelco’s sales despite a recent restructuring of its sales strategy.

China’s September copper cathode output jumped to 911,800 tons, up 13% from a year earlier to a monthly record, research house Antaike said.

According to the International Copper Study Group (ICSG), the global refined copper market will see a surplus of 467,000 tons next year from a small deficit this year.

Russia in 2021 supplied the European Union with nearly 292,000 tonnes of copper, according to data from Trade Data Monitor, which showed EU copper imports totalling more than 801,000 tonnes last year.

(By Pratima Desai; Editing by Veronica Brown and Emelia Sithole-Matarise)