In a move to capitalize on soaring copper prices and alleviate smelter shortages, Freeport-McMoRan is gearing up to export up to 900,000 metric tons of copper concentrate from its Grasberg mine starting in June. This comes after positive negotiations with Indonesia to extend its export licence, which is set to expire at the end of May.
Last week, an Indonesian minister emphasized the importance of allowing the U.S. copper giant to continue shipping copper concentrate from its Grasberg mine. The extension of the export licence is crucial to supporting smelters facing shortages, particularly in the wake of disruptions to mine supply, such as those experienced at First Quantum’s Cobre mine in Panama.
Copper prices have surged to two-year highs, reaching $10,208 a ton last week, marking a gain of more than 20% so far this year. This rally has been fueled in part by major Chinese smelters planning to cut output, further underscoring the need for increased copper concentrate exports.
Freeport is currently engaged in discussions with customers regarding the sale of Grasberg output in the second half of the year. The company’s confidence in these discussions reflects its expectation that the Indonesian government will approve continued exports. Initial commercial talks on sales of Grasberg output were recently held in Santiago, Chile, on the sidelines of an industry conference in mid-April.
Despite repeated attempts, Freeport has not responded to requests for comment via email and phone. The sources providing this information have requested anonymity as they are not authorized to speak to the media.
Indonesia banned raw material exports in 2020 to incentivize companies to refine minerals within the country, thereby adding value to its exports. Miners have been required to apply for export quotas when their smelters and refineries are under construction. Freeport has cautioned that banning exports of Grasberg concentrates could result in a loss of $2 billion in revenues for Jakarta.
Although Freeport’s Manyar smelter is scheduled for completion this month, it may take up to six months to reach full capacity. This means that the smelter will not be able to process all of the concentrate produced by Grasberg, the world’s second-largest active copper mine.
The release of Grasberg’s output is expected to impact treatment charges (TC), which are fees paid by miners to smelters for converting raw materials into metal. The copper concentrate market is anticipated to be in deficit for the next three years, with TCs recently turning negative for the first time since 2013.
Analysts project a copper deficit of 125,000 tons in 2024, a significant increase from the surplus expected late last year. This, coupled with the annual 2024 benchmark TCs settled between Chinese smelters and Antofagasta at $80 per ton, suggests a favorable market for Freeport’s expanded copper concentrate exports.
(Source: Seeking Alpha | Reuters | SaltWire)
