Copper smelters in China wary of BHP-Anglo tie-up
Reuters | April 30, 2024 |
Chinese smelters, the world’s biggest buyers of mined copper, are concerned they will lose power to negotiate prices if BHP Group, known locally as “the big miner”, succeeds in its bid for rival Anglo American.
BHP, the world’s largest listed mining group, is fine-tuning an offer that could make it the biggest producer of copper, a metal in high demand as the world seeks to shift towards electric vehicles and a lower carbon economy.
The proposed takeover would give BHP control of roughly 10% of global mined supplies, surpassing Chile’s Codelco and Freeport-McMoRan.
“This is not good news for China given the heavy reliance on external supply, and Chinese companies hold limited resources,” Zhang Weixin, a metal analyst at China Futures, said of the potential tie-up.
The China Smelters Purchase Team (CSPT), a group of top smelters that negotiates with miners on yearly prices to treat and refine copper, has no current plans to urge Beijing to investigate the deal, three sources familiar with the matter said.
CSPT’s head could not be reached for comment and BHP declined to comment.
China’s State Administration for Market Regulation also did not immediately respond to a request for comment.
There is a precedent of Chinese regulators getting involved in deals that impact copper supply.
In 2011, Glencore agreed to China’s demand that it sell its interest in Xstrata’s Las Bambas copper project in Peru to clinch their multi-billion dollar deal.
The world’s leading consumer of the metal, China imported 27.54 million metric tons of copper ore and concentrate in 2023, worth $60.1 billion, customs data showed, more than half of global supplies.
Tight market
In China, BHP is most active in the spot market, where it sells to domestic smelters using tenders, according to smelters and analysts, signing contracts for fixed volumes to be priced via an index provided by third parties.
By comparison, rival miners Freeport and Antofagasta agree an annual fixed sale price with China’s smelters that is widely used as an industry benchmark.
Chinese copper smelters said the prospect of more supply being sold under index pricing could increase uncertainty for costs and planning.
None of the smelter officials wished to be identified given the sensitivity of the matter.
One of them said index pricing meant smelters would be unable to estimate production costs and to draw up a full-year production plan.
Smelters are still recovering from supply shortages driven by the December closure of the First Quantum’s Cobre Panama mine, which drove down treatment charges (TCs) – their main source of income.
Treatment charges are fees paid by miners for converting raw materials into metal. They fall when mine output decreases as smelters have to compete for concentrate.
Adding to their difficulties, the concentrate market is expected to be in deficit for the next three years.
Last week, spot treatment charges (TCs) in China turned negative for the first time since pricing agency Fastmarkets started the index in 2013.
That compares with 2024 benchmark TCs settled between Chinese smelters and Freeport and Antofagasta at $80 per ton.
Much as consolidation raises concerns, however, William Adams, head of base metals research at Fastmarkets in London, said it could calm the market longer term by tackling the high cost and risk of developing mines.
“Look at the current tightness in spot treatment and refining charges, which is because there is insufficient mine supply to meeting smelter’s demand, highlights the need to invest more upstream,” he said.
(By Siyi Liu, Julian Luk, Mai Nguyen and Melanie Burton; Editing by Tony Munroe and Barbara Lewis)
Anglo spinoffs will ‘very likely’ need South Africa approval
Bloomberg News | April 30, 2024 |
Loading hauled ore from the mine into the primary crusher at Kumba Iron Ore’s Kolomela. (Image courtesy of Anglo American | Flickr.)
BHP Group Ltd.’s proposal for Anglo American Plc to spin off platinum and iron ore units before a takeover would likely require approval from South African regulators, according to a government agency.
Under BHP’s offer, Anglo would need to first divest its controlling interests in Kumba Iron Ore Ltd. and Anglo American Platinum Ltd., both of which are listed in Johannesburg and operate assets in South Africa. Anglo rejected the initial $39 billion proposal from the Australian mining giant last week.
Analysts have pointed to South Africa as one of the biggest potential hurdles to a deal, even if Anglo’s board can be won over. Founded in 1917 by Ernest Oppenheimer, Anglo has long ties to South Africa and was built on the back of the country’s gold mines. The proposed spinoffs highlight the fragile state of the country’s critical mining industry, as the ruling African National Congress struggles to bolster its appeal before elections next month.
Even before BHP’s proposal, Anglo’s platinum subsidiary was weighing thousands of job cuts in a country with one of the world’s highest unemployment rates. The ANC’s national chairman has signaled his opposition to BHP’s proposed takeover.
Even though BHP doesn’t want to buy Kumba and Amplats, South Africa could have an important role to play if an eventual deal is structured in the manner originally outlined. The country’s Competition Commission not only evaluates antitrust impacts but also “public interest” factors, including how a proposed acquisition will affect employment levels and historically disadvantaged people.
“There are numerous and current merger reviews in which the agency has imposed stringent conditions on the basis of the transactions’ effect on the public interest criteria,” said John Oxenham, Johannesburg-based managing partner at Primerio, a law firm that specializes in competition cases.
BHP is considering making an improved proposal for London-listed Anglo, Bloomberg reported April 27, citing people familiar with the matter. The main prize for BHP is Anglo’s South American copper operations, while the non-South African iron ore business and coking coal mines in Australia would also fit well with its existing operations.
If Anglo shareholders accept an improved offer with the same conditions, spinning off Kumba and Amplats is “very likely to meet the mandatory thresholds” that would require approval from South Africa’s regulatory authorities, Competition Commission spokesman Siyabulela Makunga said in an emailed response to questions. The agency assesses each deal “based on its own merits” in accordance with the law, he said.
South Africa Mines Minister Gwede Mantashe has signaled his opposition to the takeover, telling Bloomberg last week that he “wouldn’t support” the proposal. “I don’t think Anglo will agree to that,” said Mantashe, who also chairs the ANC.
The country’s state pension fund – the Public Investment Corp. – is also Anglo’s second-largest shareholder, controlling an 8.4% stake, according to data compiled by Bloomberg.
(By William Clowes)
Reuters | April 30, 2024 |
Chinese smelters, the world’s biggest buyers of mined copper, are concerned they will lose power to negotiate prices if BHP Group, known locally as “the big miner”, succeeds in its bid for rival Anglo American.
BHP, the world’s largest listed mining group, is fine-tuning an offer that could make it the biggest producer of copper, a metal in high demand as the world seeks to shift towards electric vehicles and a lower carbon economy.
The proposed takeover would give BHP control of roughly 10% of global mined supplies, surpassing Chile’s Codelco and Freeport-McMoRan.
“This is not good news for China given the heavy reliance on external supply, and Chinese companies hold limited resources,” Zhang Weixin, a metal analyst at China Futures, said of the potential tie-up.
The China Smelters Purchase Team (CSPT), a group of top smelters that negotiates with miners on yearly prices to treat and refine copper, has no current plans to urge Beijing to investigate the deal, three sources familiar with the matter said.
CSPT’s head could not be reached for comment and BHP declined to comment.
China’s State Administration for Market Regulation also did not immediately respond to a request for comment.
There is a precedent of Chinese regulators getting involved in deals that impact copper supply.
In 2011, Glencore agreed to China’s demand that it sell its interest in Xstrata’s Las Bambas copper project in Peru to clinch their multi-billion dollar deal.
The world’s leading consumer of the metal, China imported 27.54 million metric tons of copper ore and concentrate in 2023, worth $60.1 billion, customs data showed, more than half of global supplies.
Tight market
In China, BHP is most active in the spot market, where it sells to domestic smelters using tenders, according to smelters and analysts, signing contracts for fixed volumes to be priced via an index provided by third parties.
By comparison, rival miners Freeport and Antofagasta agree an annual fixed sale price with China’s smelters that is widely used as an industry benchmark.
Chinese copper smelters said the prospect of more supply being sold under index pricing could increase uncertainty for costs and planning.
None of the smelter officials wished to be identified given the sensitivity of the matter.
One of them said index pricing meant smelters would be unable to estimate production costs and to draw up a full-year production plan.
Smelters are still recovering from supply shortages driven by the December closure of the First Quantum’s Cobre Panama mine, which drove down treatment charges (TCs) – their main source of income.
Treatment charges are fees paid by miners for converting raw materials into metal. They fall when mine output decreases as smelters have to compete for concentrate.
Adding to their difficulties, the concentrate market is expected to be in deficit for the next three years.
Last week, spot treatment charges (TCs) in China turned negative for the first time since pricing agency Fastmarkets started the index in 2013.
That compares with 2024 benchmark TCs settled between Chinese smelters and Freeport and Antofagasta at $80 per ton.
Much as consolidation raises concerns, however, William Adams, head of base metals research at Fastmarkets in London, said it could calm the market longer term by tackling the high cost and risk of developing mines.
“Look at the current tightness in spot treatment and refining charges, which is because there is insufficient mine supply to meeting smelter’s demand, highlights the need to invest more upstream,” he said.
(By Siyi Liu, Julian Luk, Mai Nguyen and Melanie Burton; Editing by Tony Munroe and Barbara Lewis)
Anglo spinoffs will ‘very likely’ need South Africa approval
Bloomberg News | April 30, 2024 |
Loading hauled ore from the mine into the primary crusher at Kumba Iron Ore’s Kolomela. (Image courtesy of Anglo American | Flickr.)
BHP Group Ltd.’s proposal for Anglo American Plc to spin off platinum and iron ore units before a takeover would likely require approval from South African regulators, according to a government agency.
Under BHP’s offer, Anglo would need to first divest its controlling interests in Kumba Iron Ore Ltd. and Anglo American Platinum Ltd., both of which are listed in Johannesburg and operate assets in South Africa. Anglo rejected the initial $39 billion proposal from the Australian mining giant last week.
Analysts have pointed to South Africa as one of the biggest potential hurdles to a deal, even if Anglo’s board can be won over. Founded in 1917 by Ernest Oppenheimer, Anglo has long ties to South Africa and was built on the back of the country’s gold mines. The proposed spinoffs highlight the fragile state of the country’s critical mining industry, as the ruling African National Congress struggles to bolster its appeal before elections next month.
Even before BHP’s proposal, Anglo’s platinum subsidiary was weighing thousands of job cuts in a country with one of the world’s highest unemployment rates. The ANC’s national chairman has signaled his opposition to BHP’s proposed takeover.
Even though BHP doesn’t want to buy Kumba and Amplats, South Africa could have an important role to play if an eventual deal is structured in the manner originally outlined. The country’s Competition Commission not only evaluates antitrust impacts but also “public interest” factors, including how a proposed acquisition will affect employment levels and historically disadvantaged people.
“There are numerous and current merger reviews in which the agency has imposed stringent conditions on the basis of the transactions’ effect on the public interest criteria,” said John Oxenham, Johannesburg-based managing partner at Primerio, a law firm that specializes in competition cases.
BHP is considering making an improved proposal for London-listed Anglo, Bloomberg reported April 27, citing people familiar with the matter. The main prize for BHP is Anglo’s South American copper operations, while the non-South African iron ore business and coking coal mines in Australia would also fit well with its existing operations.
If Anglo shareholders accept an improved offer with the same conditions, spinning off Kumba and Amplats is “very likely to meet the mandatory thresholds” that would require approval from South Africa’s regulatory authorities, Competition Commission spokesman Siyabulela Makunga said in an emailed response to questions. The agency assesses each deal “based on its own merits” in accordance with the law, he said.
South Africa Mines Minister Gwede Mantashe has signaled his opposition to the takeover, telling Bloomberg last week that he “wouldn’t support” the proposal. “I don’t think Anglo will agree to that,” said Mantashe, who also chairs the ANC.
The country’s state pension fund – the Public Investment Corp. – is also Anglo’s second-largest shareholder, controlling an 8.4% stake, according to data compiled by Bloomberg.
(By William Clowes)
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