Codelco to cut copper shipments to China next year

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Codelco to cut copper shipments to China next year

According to the person familiar with the matter, Bloomberg is set to cut shipments of refined copper to China next year after extended outages at its smelters and strong demand elsewhere in the country.

The Chilean mining giant will reduce its shipments to customers under annual contracts for 2023 by around 10%, in line with the decline in its refined metal production, said a person who asked not to be named discussing commercially sensitive information. The person said that Codelco is likely to make fewer spot sales to China next year because copper usage in North America and Europe will be resilient, because of the fact that it has historically sold a large amount of metal in shorter-term deals.

In a written response, the state-owned firm declined to confirm a cut in shipments to China, saying negotiations are ongoing.

The year of codelco has struggled, with copper output dropping 10% between January and September. That put the company on course to lose its crown as the world's top producer.

Larger repair works at two smelters are also contributing to a drop in its output of refined copper, which has been snapped up by Chinese customers in the last few years, despite the fact that the bulk of the decline was caused by setbacks at its mines. Some buyers have baulked at Codelco's latest annual premium of $140 for China.

Codelco's Ventanas smelter is undergoing a 100 day maintenance, while its Chuquicamata smelter roasts and processes large volumes of high-arsenic concentrate that is difficult to export has extended planned repair works. The maintenance program at Chuquicamata made the company lowered its production targets for the second time in three months in October.

With contractual negotiations kicking into gear, Codelco's move to cut sales could cause anxiety among Chinese buyers who have been hoping for improvements in supply after bottlenecks in domestic smelting this year. Chinese refined copper market has been tight in recent months, even with global mine supply increasing and a debt crisis in the property sector weighing on demand.

Codelco s spot sales to China also look poised to decline next year, as Russia s invasion of Ukraine and subsequent self-sanctioning from manufacturers in Europe creates an opportunity for the company to sell more metal there. European spot premiums rose to their highest in several years, while the US market is expected to remain a strong importer of South American cathode next year.

James Attwood and Mark Burton have assisted in the process.

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