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Copper TC/RCs could spike on Vedanta force majeure

Keywords: Tags  copper, Vedanta Resources, treatment charges, Sterlite Industries, force majeure

LONDON — Treatment and refining charges (TC/RCs) for copper concentrates could spike in the near term after Vedanta Resources Plc’s declaration of force majeure at its Tuticorin smelter in India.

Spot TC/RCs for clean copper concentrates have been quoted at about $55 per dry metric ton/5.5 cents per pound in recent weeks, down from spot TC/RCs as high as $80/8 cents earlier in the year as new mine supply entered the market. But terms may rise again if the Tuticorin outage lasts more than two to three weeks, a smelter source said.

Vedanta subsidiary Sterlite Industries Ltd. declared force majeure to customers and suppliers April 2 after the Tamil Nadu Pollution Control Board ordered the 400,000-tonne-per-year smelter to halt operations March 29 following pollution complaints.

The declaration of force majeure came despite Sterlite’s legal clearance to continue to operate the plant, which was granted April 2.

India’s Supreme Court overturned a stayed order issued by the Madras high court in 2010 for the plant to be closed, upholding Sterlite’s appeal against the decision, the company said.

While it was satisfied with the appeal, the court ordered Sterlite to pay 1 billion rupees ($18.22 million) to a nationalized bank and ordered that the interest generated be used for air and water improvements at the plant, Sterlite said April 2.

In its notice to customers, the company said the force majeure will remain in place until "the situation returns to normal," but suppliers to the company were confident that the plant will reopen following a meeting with the pollution control board in the coming week.

Sterlite buys a large portion of the feed for the smelter on contract, but it also has a considerable exposure to the spot market for concentrates, one supplier said.

By the afternoon of April 3, traders and producers were offering copper concentrates destined for the Indian smelter to alternative customers, market sources said.

One trader had a concentrates cargo in port as the shutdown was announced and is now looking for a new buyer for the material, the supplier told AMM sister publication Metal Bulletin.

Miners also have approached customers to offer them early delivery of material and additional volumes under long-term supply contracts to place concentrates due to be delivered to Tuticorin in April, a smelter source told Metal Bulletin. "Tuticorin is quite a big smelter and it is fully exposed to concentrates imports, so this could be quite significant for the custom concentrates markets if the suspension continues," he said.

Any sustained outage could loosen the market for copper concentrates over and above forecasts for oversupply arising from increased mine production and a series of smelter outages planned this year by Atlantic Copper SLU, Aurubis AG, Boliden AB and KGHM Polska Miedź SA.

The outage also is having an effect on copper cathode premiums in the region, as domestic customers of Sterlite evaluate whether they will need to import material to cover their requirements.

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