WEBVTT
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Hello and welcome to Copper Weekly, a benchmark podcast.
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I'm Michael Finch, Head of Strategic Initiatives, and with me we have Albert Mackenzie, Copper Analyst and Market Reporter, where each week we'll unpack what really moved the copper market and what to watch in the coming days ahead.
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Along the way, we'll be joined by a number of guest speakers.
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So kick back, relax, and enjoy this quick download on Everything Copper.
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Welcome back to Benchmarks Copper Weekly.
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We sat here on a Friday.
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It's the tail end of LME week.
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So lots to lots to unpack.
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Excuse any slightly shaky voices.
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It's been a long week, lots of talking.
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Albert's joining us again, and we can really get um his latest takes, um, any key gossip, any bits of information.
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But um Albert, how are you doing?
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I'm doing very, very well.
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Um I am completely knackered.
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Um in I I realize I've I've worked essentially every day since Wednesday last week, and I've had a couple of 14, 15-hour days this week.
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So I am a little bit worse for wear.
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Um and I'm I you know what something good is I'm sober for the first time in about a week, which is nice.
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Um I think I think the exasperation of what LME does to you means that from about lunch uh every day during LME week, someone always suggests a pint.
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So that's that's nice.
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And I've got um again taking taking the lead from our colleague Alex, let's some small talk.
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I've got a gig this evening.
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I'm I'm playing um playing in my band.
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Um and hopefully actually I've invited someone I had a meeting with this morning, so there might be um a miner mining company in attendance.
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Well, maybe your your LME week's not quite over, but uh you do have XFOF as well, so you can't can't complain too much, but uh well timed.
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I can't complain.
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Yeah, well timed.
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Yeah, exactly.
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Um it's like I said, it's been a hectic LME week.
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I know many of probably our our listeners are feeling the same.
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Um hopefully some fruitful meetings, hopefully some interesting sessions that everyone joined.
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But yeah, I really want to get your take on things, Albert.
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What are you seeing and hearing?
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And and I was gonna ask a question.
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I don't just want to hear about the areas where everyone is in agreement.
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And uh you made a funny quote just before we joined this, where are people agreeing?
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So maybe we should maybe we should look at uh it in two two minds.
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But um, what yeah, what's your major takeaways?
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Let's let's dive into it.
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I would say without being too defeatist about what this week has done, it felt felt as close to pointless as any fest uh conference I've ever been to.
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It was interesting, and I and I did find it interesting.
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I heard a lot of good gossip and I heard a lot of interesting news and had some really interesting discussions, right?
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But normally you have a clearer idea on what's happening next.
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Like there's I guess there's a couple of reasons you go to a conference, you want to know what's already happened, you want to take away some new understanding of the market, but you also want to know what's gonna happen next.
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Yeah, you want to find consensus amongst you know all of your meetings, and yeah, yeah.
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And I would say we're caught the LME is taking place just before a couple of really big updates.
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So we don't know what's gonna happen with US tariffs, and everyone expects to have some potential update um before the new year, but after midterms.
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Yeah, and we also don't know what's happening with copper concentrate TCRCs.
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You know, the market is super aggressive.
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It is unclear.
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Normally at this point, we'd be talking about what do you think the benchmark is going to be.
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And this year it's do you think there'll be a benchmark?
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If there's not a benchmark, what will happen?
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If so, what number will it be?
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It's sort of, you know, no one seems to want to put their foot down.
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And we've actually heard a number of participants, certainly like a number of smelters are being very coy.
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They don't want to show their hand too much.
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Um, no one even seems to know who's I mean, this is quite interesting.
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I think I've now got a good idea, but I want to double check it.
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But normally the the Chinese smelting industry is led by a specific smelter, right, in their discussions.
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No one even knows who's doing that, right?
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That's like the level of uncertainty we have is like some people like who who who will be leading these discussions, um, and that's unclear.
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The other thing is it's a big time, certainly for European participants, where they lock in long-term units and normally have a an idea about how much they're gonna lock in and at what level.
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Now we have an idea of the level because Arubis and Cadelco, and we'll circle back to that in a sec, have offered their premiums.
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But my understanding from a lot of people I've spoken to is everyone wants to wait until the the the final hour before deciding how much to allocate to next year.
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Because this year premiums have been under pressure in Europe.
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Um and without a tariff pull, it becomes really hard to justify such high premiums.
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The market in Europe would likely be really loose, but no one knows whether a tariff's coming or not.
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So we're kind of, you know, we've got conversations around concentrates and conversations around cathode are both reliant on two things that we we don't know.
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And that there's there's almost a symbiotic relationship between those two as well, because last year we saw smelters push to get extra units on the conch side, having already secured really good cathode sales.
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So one of the one of the East Asian smelters, ex-China, last year apparently agreed this massive deal with huge premiums with a couple of traders for like 150 KT.
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It then made sense for them to go out and be aggressive on conks.
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But those traders and and and everyone doesn't know what what the tariff situation will look like next year.
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So we're it's just a cloud of uncertainty, um, which you know, and I often say this when I leave it, oh, I've left with more questions than answers.
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But I really have this year, and and and also we are sometimes LME weeks quite early in October.
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We are very late in October, and Cesco Shanghai is in uh three weeks' time, so there's a there is a good cause to just kind of go, why don't we wait until at least then?
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You know, midterms, tariff situation, and TCRCs will all be more might be more clear then.
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Might be, which is a the key thing.
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And uh I think you're you're absolutely right.
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And it also feels like no one's willing to show their hands, no one wants to be first to show their hands, right?
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So there's it's there's real wait and see and hold off attitudes um until a few key things are lined up.
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Like I said, maybe maybe there might be more clarity on the tariffs post-midterms.
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We don't know that, and that's that's the risk, right?
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But how long can people keep kicking the can down the road, I suppose, is is a question for you, Albert.
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Specifically thinking related to benchmark discussion.
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Yeah, so so benchmark can go on forever, really, or forever's an exaggeration.
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Benchmark can go on for a very long time.
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We've seen that in the last few years.
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That um the last time I might be corrected by someone, I think the last time it was actually agreed during Cesco week was the 88 number, which was so since then we've had zero, 22.25, and then the year before was 80 and 8.
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So I think that was a benchmark for 2024.
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Um, that was actually agreed in Shanghai on the final day or the Saturday, like I think literally the Saturday morning or the Friday evening or something.
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That was what that was when that happened.
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Other than that, it's been prolonged and protracted discussions.
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Um, I did ask a number of copper cathode participants in Europe, because they've said, look, it's wait and see.
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And I was basically long, how how how long can you wait and see?
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And they said, to be fair, we can most people can wait until at least December.
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Um, the fear of acute tightness, if the offers are out, you know, Arubus have put out their offer, Cadelka have put out their offer, European customers are important to those companies.
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If the offers are there, those consumers, those traders probably have the potential to to wait, you know.
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There is no rush for them to agree, you know, before the beginning of November, before the end of, you know, some people say, look, it's the normal process takes weeks anyway.
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You know, people have to say tons.
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But what's interesting is some people aren't even saying how much tonnage they want.
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Which normally one of the traders I spoke to was like, normally you get a good idea of how much tonnage people want.
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You might then have to, you know, discuss the minutiae and send people contracts, and it takes a couple of weeks.
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But this year that people are being very coy about that as well.
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Um, but certainly I think it is worth waiting until after the midterms, those are next week.
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The US administration might come out swinging afterwards and and announce the tariff, and and there was a rumour going round.
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I say a rumour, a trading company was telling everyone that their belief was that the tariff will become clear between um the midterms and and and uh Thanksgiving, which I think is actually like a two-week period.
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So anyone who believes that will will wait until then and there's no urgency.
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There's no urgency to make that decision.
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So so it can be kicked down the the road a little bit.
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Um Antofagasta and the Chinese Motors on the TC side don't normally start discussing like real numbers at LME week anyway.
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They have their sort of preliminary discussions and try and make things, you know, that they you know, there's been rumors of of of certain levels circulating this week, and we've heard, you know, I'm sure anyone who's in the TC space has heard a number of, oh, this smelter offered that, and this melter offered that, and Antifagasta said this, and Antifagasta said that.
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But actually, I think in terms of like official, this is the number we want, that doesn't even happen until Shanghai or the week before, anyway.
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So it can be prolonged a little bit.
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Um, and and the acid price as well.
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I mean, add another uncertainty into the market is you know, currently the high acid price is supporting the uh Chinese smelters.
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Could it go higher?
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There is talk of you know a large buildup of uh fertilizer in in China, and maybe the export ban on that gets lifted, the export ban on sulfuric acid gets lifted, the prices start going back up, or does a straight-of-hore moose reopen and then prices start going down?
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And and it's just sort of like fumbling around in the dark trying to work out what the best thing is.
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It's a huge swing factor, right?
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For for you know, small profitability right now, and and if a benchmark is settled at minus whatever it is, 180, and if sapphiric acid prices you know completely come off the boil, it's it it the economics are really tough to to stack up and justify.
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So I suppose the question is Albert, in your gut take, or if you were to try and form a consensus on whether or not a benchmark will be settled, what what's your your feeling here?
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I would say going into the week, I wouldn't I would have been 50-50.
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Yeah.
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Um, and actually I spoke to a big mining company and they agreed with basically what you just said that the uncertainty was be sufficient that actually maybe spot-linked indexes might take precedence because you don't want to go in if you're a smelter or any business and you're buying loads of something and you're selling loads of something, you kind of want to be as exposed to the spot on both sides.
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You don't or like if you're really long-term on one side and really long-term on the other, you can kind of see at the beginning of the year what what your profitability was going to be.
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But if you leave yourself fluctuating on one side, as for example, the Chinese might with the acid, you might want more ability to fluctuate on the other, because the higher the acid goes, the lower TCs go.
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But inversely, if you you know, spot levels are minus 250 at the moment, say say uh uh, you know, those are for marginal units, so people don't necessarily believe that smelters could survive buying all their tons there.
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But say you um agreed a number of your units that minus 150 for benchmark.
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If the acid price was to tank, that would really impact the smelter's profitability.
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So some of the miners were like, maybe they maybe they'll want floating units just because they're so beholden on the sale side that they don't want to become too beholden on the buy side as well, to to you know, to to set number while their sale number is fluctuating.
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However, basically everyone thinks the Chinese will want a set number, the Chinese will want a specific number.
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What becomes unfathomable is if that number is minus 150, say.
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Let's be real here.
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You know, the the the spot market is minus 250.
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I don't see Antifagaster agreeing at zero, certainly not.
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Minus 50 also seems too conservative.
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I you know, I think realistically there was a rumour going round that Antefagasra were asking for negative triple digits.
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I heard it loads of times.
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I don't believe that rumour is necessarily true, but the reason it was going round and the reason rumors like that spread is because that's believable.
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Yeah, that's sort of what people are expecting anyway.
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I I I went for lunch with someone yesterday and all of our we we we we sort of did a time a time box to sort of open again next LME week and what we thought about a load of stuff, and and we all thought TC's in the minus hundreds, right?
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That's for for benchmark.
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So if we uh agreed, if we say you know TC's benchmark might be in the minus hundred levels, right?
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And but I can't see that being accepted elsewhere, and I'm I'm sort of indicating here perhaps the the Japanese.
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What's your take?
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Yes, I think there's a strong possibility that those numbers aren't appealing to people outside of China.
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Um China have a lot of advantages over some other smelters, they're very new.
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Um, lots of them are state-owned enterprises.
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Borrowing costs in China are a very different picture to other markets.
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I mean, lots of the regions have their own benefits.
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Japanese smelters sell CAFO to India at a at a really high premium because of an import duty um thing that they can get round, like they're duty-free imports into India and no one else is, so they can make loads of money.
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Indian smelters get the same increase in duty, and European smelters have really good premiums, and a number of other things.
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So it's not just about TCs, but you know, the Chinese are arguably are more able to deal with or are able to deal with these aggressive TCs, and a number of smelters from the rest of the world are kind of like, this is pretty hard to this is you know pretty challenging to actually handle right now.
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The other thing is, I mean, we know that smelters from every region have bought at negative TCs at some point.
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Um we've even heard Japanese smelters have bought at negative TCs, which sort of surprised me when I heard it because you know we thought they weren't super active in the spot market, but um you know sources have told us that that's happening.
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I think the other thing is what it does to the long-term perception about their own businesses.
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If you TCs traditionally are these fees that are charged to smelters, if the smelters suddenly have to start paying the miners for that copper, what does that mean?
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Is it precedent setting to say we can take negative TCs?
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Um, is it semantically unappealing that you are paying someone more for the in theory more for the value of the copper than the the copper is worth and you haven't even turned it into the the cathode yet?
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Now, the longer you push that argument, you kind of come up with a few alternatives.
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Either ex-China smelters go minus 120, not worth it.
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We disagree.
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They either have the option to shut or to work something else out.
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They need units, they cannot refuse to accept uh aggressive TCs and continue operating.
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They need units.
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That's the that's the thing here is so so do they then give up side terms?
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Do they then make other arrangements?
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You know, we understand that um a major mining company, uh a major trading company who didn't have access to any cathode that they were producing themselves made a deal with an East Asian smelter last year to essentially toll through their smelter.
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So it's boosting the smelter's utilization rate, they got a bit of the acid and some other stuff, and the min uh the trading company got a load of cathode for free, which they then sent to the the US.
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Now, do we start seeing those sorts of arrangements?
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We've heard BHP and Antifagasta have done deals whereby they receive the acid back from those transactions.
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I don't I I you know I don't know the how it works.
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They might be buybacks, it might be you know tolling, it might be favorable premiums, whatever it is.
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But companies like Antifagasta who have SXEW production, companies like BHEP who have SXEW production need acid.
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So do we start seeing other deals?
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And that's maybe what we'll see.
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We'll see a very murky picture.
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I you know, I said that LME week has left me confused and a bit murky.
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Well, we might be feeling the same in six months' time.
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We might have a headline number for the Chinese and a load of deals that we hear that we just don't understand.
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Because you know, the TCRC is one number.
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Traditionally, the other side terms were more known and more stable.
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Now, I'm not saying that it was always really transparent and it's become really opaque, but they were more known and they were more stable.
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There were standard gold payables, there was, you know, we weren't seeing necessarily huge amounts of acid buyback.
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So you could kind of look at a handful of deals and they'd all be different, but you'd have a rough idea.
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But we could see huge disparity.
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You know, I I said to someone, if if I hear a Japanese smelter's bought annual units for ten dollars, positive, I wouldn't be shocked, I just wouldn't know every other detail, and therefore I would I wouldn't know why they'd managed to get that deal.
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And and I think that's what will really confuse us.
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What I will say is there will be a tentativeness to giving up beneficial payment terms and and side terms.
00:18:27.759 --> 00:18:39.519
So if the you know, the moment we've heard that Chinese smelters, some Chinese smelters are buying gold at far higher payability thresholds than than they used to, just to be more competitive.
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Now, you know, another thing is at the moment um standard payment terms have a sort of um I think it's 96.5% payability on the copper contained in concentrate.
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Now you could move the TC quite a lot if you change that to 97% or 97.5 or 98%, right?
00:18:59.839 --> 00:19:01.039
And it would make the headline TC.
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Exactly.
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I mean you're you're moving money from one pocket to another, really.
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But if your semantic worry is that you're not getting paid for your treatment charges, you you might do that.
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Yeah.
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And you might treat your business more holistically and try and work out something like that.
00:19:16.079 --> 00:19:21.039
But then if you do concede those terms, do you get them back when the market turns?
00:19:21.200 --> 00:19:27.039
And that's that's the kind of debate that the smelters will be having.
00:19:27.359 --> 00:19:41.920
Do we, you know, I mean, some of them won't care about the the visuals that that they're you know agreeing to deeply negative TCs, it will be about, you know, I mean European Japanese um smelters hedged all their acid last year.
00:19:42.079 --> 00:19:50.640
You know, someone was telling me this morning that um the Japanese, lots of Japanese smelters are getting about half the value of the acid that they would if they were participating on the spot market.
00:19:50.799 --> 00:19:58.319
Now, as they position forward for next year for 2027, you'll see them make a lot more money on acid.
00:19:58.480 --> 00:20:04.640
Same with the Europeans, they'll make a lot more money on acid next year because they'll have agreed annual levels, and those annual levels will be higher.
00:20:04.799 --> 00:20:07.440
So maybe that gives them all leeway to move down, some other things.
00:20:07.519 --> 00:20:11.599
But it's it's gonna be baffling, it's gonna be absolutely highly nuanced, yeah.
00:20:11.839 --> 00:20:18.880
Yeah, and I think even the you know, the PRA indexes that track the market, even there, they're doing a very good job.
00:20:18.960 --> 00:20:24.559
And you know, I used to I used to work for one of them, and and I think they're doing a very good job of providing some transparency to the market.
00:20:24.799 --> 00:20:35.200
But every time someone agrees a deal with completely different side terms to another smelter, the numbers become harder and harder to understand on their own without context.
00:20:35.519 --> 00:20:39.920
And um, you know, there's talk of I think that's one of the other things.
00:20:40.000 --> 00:20:52.720
There was talk of more people using PRA indexes, and there's a question of how the hell do PRAs track a thousand different side terms on top of the TCRC, and how can we trust them?
00:20:52.960 --> 00:21:00.480
Yeah, not not trust them as individuals and trust them that they're doing their best job, but how do we trust this process and put it into contracts?
00:21:00.559 --> 00:21:14.640
That's where it starts to become a challenging time, and I think it will be, you know, it'll probably be a very good time for them in a number of ways because there's probably going to be more units signed to their indexes next year, but it's gonna be bloody hard work, um, and there'll be a lot of challenges for them.
00:21:15.440 --> 00:21:15.839
Good.
00:21:16.000 --> 00:21:27.200
Should we talk about another area where seemingly everyone has a different opinion, but equally every single opinion we've heard could be easily defended, uh, and that's on the outcome of the tariffs.
00:21:27.440 --> 00:21:30.640
Not necessarily the outcome, but what will happen next with the tariffs?
00:21:30.880 --> 00:21:33.279
And you have a multitude of scenarios here.
00:21:33.359 --> 00:21:40.240
We have I think most people are in agreement, nothing before the midterms, but after midterms, maybe we might get clarity around Jan 27, 15%.
00:21:40.640 --> 00:21:47.680
Or we've heard it'll be Jan 1 and we'll wake up to uh a tweet or a truth saying, yep, today's a day for tariffs, so real late in the day.
00:21:47.759 --> 00:21:54.240
And then we've heard people saying that maybe there's going to be no visibility about that phase in 30% in Jan 28.
00:21:54.319 --> 00:21:56.640
Maybe there's ongoing strategic ambiguity.
00:21:56.720 --> 00:21:58.079
Maybe we don't hear anything at all.
00:21:58.160 --> 00:22:07.119
And again, is that a strategic play or is That just you know someone kicking the can down the road, or Trump's focus is elsewhere post perhaps not so positive results from the midterm.
00:22:07.279 --> 00:22:22.160
So, this is an area that everyone seems to disagree on, but equally I I get and understand everyone's opinion, but naturally that directly feeds into everyone's expectations of price forecast next year, um, or where prices will settle as an average for 27.
00:22:22.240 --> 00:22:34.240
And you could justify in nothing, we can both sit here and justify easily a world where we see$9,000 uh dollars per ton pricing, or we see upwards of 16, 17, 18, 20.
00:22:34.319 --> 00:22:39.440
It just depends on the outcome of the discussions relating into tariffs.
00:22:39.599 --> 00:22:48.960
So maybe just I don't know, are there any key nuggets that you gleaned in your conversations that can help shed some light on what what might be the the thing people were most thinking?
00:22:49.039 --> 00:22:51.680
What's more aligned to consensus, I suppose?
00:22:52.000 --> 00:22:52.480
Yeah.
00:22:52.720 --> 00:22:55.599
Um yeah, it's it's it's murky.
00:22:55.759 --> 00:22:57.200
I think you've put it put it very well.
00:22:57.440 --> 00:22:59.119
There was one thing actually I wanted to mention.
00:22:59.279 --> 00:23:22.160
I was debating how to mention it, because I did hear a good nugget of of information, and I'm gonna share it with our listeners, but I'm going to urge I'm gonna phrase it as nuancedly as I can put it and as give as much context as I possibly can so people don't uh don't think I'm gossiping or anything or spreading rumors.
00:23:22.480 --> 00:23:35.519
We understand, and I I heard this LME week, that the US in August, the US Department of Commerce told a number of participants, or had a meeting with a number of participants about what might happen with the tariffs.
00:23:36.160 --> 00:23:59.920
And at that point, the picture becomes a bit murkier because some of the people in that room have reportedly said that they were being forewarned that a tariff was coming at 15% and then growing to 30%, which would obviously be very big news, very bullish, and give the impression that that that was US government policy.
00:24:00.319 --> 00:24:08.480
Some of the other people in the room, and this is where it becomes nuanced, and this is probably why um it hasn't been in the news because no one's been able to clarify this.
00:24:08.640 --> 00:24:24.880
Some of those participants said that the US Department of Commerce basically said the current policy, as stated in the 232 investigation, and this is true, as stated in the 232 investigation, is 15% tariff starting in 2027 and 30% tariff starting in 2028.
00:24:25.279 --> 00:24:29.359
And that they were just saying, you know, prepare as if that's still the case.
00:24:29.599 --> 00:24:36.400
And those two things are really different because one is just saying, look, it's status quo, we've we're not saying any update, the other is actually a warning.
00:24:36.480 --> 00:24:47.279
And I I I personally tend to just from some of the other bits of context I've heard, lean towards they were just restating what was already the case.
00:24:47.519 --> 00:24:51.519
But uh that rumour has been circulating around LME week, so I thought it was worth sharing.
00:24:51.680 --> 00:25:00.319
It also is feeding some of the trading companies think more bullishly about that, think that that is that they were warned because they were they were told.
00:25:00.559 --> 00:25:03.279
Um, you know, so that's that's one of the stories.
00:25:03.440 --> 00:25:16.559
And so that narrative, which I certainly didn't believe before that there would be a 15 rising to 30% tariff, now seems potentially more likely because of some of those rumours and stories.
00:25:16.799 --> 00:25:20.480
The other thing is that meeting took place in August.
00:25:20.799 --> 00:25:23.759
Is that still US government policy?
00:25:24.160 --> 00:25:26.319
It was also the Department of Commerce.
00:25:26.559 --> 00:25:33.599
Does the Department of Commerce know exactly what's going on in Donald Trump's head and you know, could the midterm results change that?
00:25:33.680 --> 00:25:36.559
Could you know still so much uncertainty, right?
00:25:37.519 --> 00:25:43.119
And the decision that's going to be made might not be known by anyone in the world at the moment.
00:25:43.200 --> 00:25:45.680
I think that's kind of where I'm I'm sat.
00:25:46.000 --> 00:25:54.880
What I will say is that we know from from trade data and people in the market, there's been a big push to get units into the US before 2027.
00:25:55.440 --> 00:25:59.200
Um we're expecting October to be record-high imports.
00:25:59.599 --> 00:26:06.559
Um there is a huge amount of bulk material heading over, according to sources we've spoken to in the market.
00:26:06.720 --> 00:26:19.920
The other thing is we've spoken to producers of of copper cathode who have said that some traders are trying to uh cancel contracts that would arrive into the US after January 1st.
00:26:20.160 --> 00:26:27.359
Again, the question is are these things reasonable behavior to alleviate some risk?
00:26:27.519 --> 00:26:30.480
And actually, you can interpret it one of two ways.
00:26:30.559 --> 00:26:41.759
You can say, Oh, this is a a sign that the the traders think it's it's coming, they're trying to get material in, they're trying to cancel stuff that's arriving after, but it's also just a reasonable thing to do.
00:26:42.000 --> 00:26:46.640
No one knows do you want a load of copper to arrive after it would have to pay a gigantic tariff?
00:26:46.799 --> 00:26:47.519
Probably not.
00:26:47.680 --> 00:26:48.799
Is it worth risking it?
00:26:48.880 --> 00:26:50.240
How much money are you gonna make?
00:26:50.400 --> 00:26:53.359
Is it it's just a a play on that thing.
00:26:53.680 --> 00:26:54.240
I agree with that.
00:26:54.319 --> 00:26:55.759
I don't think you can look into that too much.
00:26:55.839 --> 00:26:58.079
I think that's just sensible, sensible business there.
00:26:58.640 --> 00:26:59.680
Yeah, exactly.
00:26:59.839 --> 00:27:10.319
And and what I would say is in the situation where there's my personal view before LME week is that Donald Trump, when he puts in a tariff, he puts in a big one and then leaves it there.
00:27:11.200 --> 00:27:21.680
But my a number of people have said basically you do that, the CME starts to draw down material, the US loses this stockpile of material that they've may think is a good thing.
00:27:21.839 --> 00:27:23.680
They've got you know, I've heard estimates this week.
00:27:23.759 --> 00:27:39.359
We our estimate will be 1.8 million by the end of the year, but someone else has said over well over 2 million, which I can I can actually believe because since we've put together that data, we've heard more and more talk about increased imports arriving into the US before January 1st.
00:27:39.440 --> 00:27:42.240
So that that might you know supercharge, could creep up, right?
00:27:42.319 --> 00:27:44.240
Yeah, could creep up, yeah, exactly.
00:27:44.480 --> 00:27:48.720
Um so do they want to lose that material?
00:27:48.880 --> 00:27:51.039
Do they think it's strategically important to have it?
00:27:51.119 --> 00:28:03.680
I mean, I I my personal view is the US doesn't need a gigantic stockpile of copper for like two years worth of imports or three years worth of, I mean, if it gets to two million tons, it's like four years worth of imports of copper, they don't need it.
00:28:04.079 --> 00:28:07.440
Um but may they may disagree.
00:28:07.519 --> 00:28:15.039
And if you have a rising tariff, it goes 15 and then 30%, that continues the flow of material because people can still play that arbitrage.
00:28:15.119 --> 00:28:44.240
Um and it will actually probably draw in even more material because if it's guaranteed, if they say 15 now, 30 later, and they say that, the forward curve on the CME will go crazy, the arbitrage will go crazy, and it'll be worth paying the 15% tariff to then have that material in the US and either sit on it and deliver it to the exchange if you're convinced the 30%'s coming in after the day or sell it after the tariff increases or sell it on the curve, or just sell it to customers in the US who would be willing to pay the CME price, which will be far higher than the LME price.
00:28:44.559 --> 00:28:58.319
So that situation uh is very bullish, you know, very, very bullish copper prices, but also it would tighten, you know, ever almost every brand in Europe is now CME deliverable.
00:28:58.480 --> 00:29:04.079
So Rubis is CME deliverable, Bricksleg is CME deliverable, Atlantic Copper is, KGHM is.
00:29:04.160 --> 00:29:18.160
I don't I don't know about Boleiden, but I'm sure they're oh I guess Boleiden's tank house at Ronscar had it had issues and they've just restarted, so they might not I I I actually I don't know about Boleiden, but a huge amount of European production could in theory head to the CME.
00:29:18.480 --> 00:29:22.160
And therefore, that's dangerous for premiums.
00:29:22.480 --> 00:29:45.680
Now it it means that you might really struggle to get material next year, and actually Arubis's 347 deal looks like a good deal if the if the if a trader can make a 15% profit by shipping stuff to the US, that premium, you know, at$14,000 copper prices is far, far bigger than$340, and they might be able to outcompete people and make the market really tight.
00:29:46.000 --> 00:30:06.799
However, if the US nothing happens in November after the midterms, nothing happens in December, nothing happens in January, or that the US says we're not going to do a tariff, or they say we're doing a tariff and it's not growing, it's just coming in at 15% and it's gonna stay there, that's very bearish for copper.
00:30:07.039 --> 00:30:13.359
Because there would be a slowdown of this big pull of material into the US, and those units would have to find other homes.
00:30:13.519 --> 00:30:35.440
Now, an interesting point that one of our contacts made yesterday was that US participants are likely to keep on importing copper even if a tariff comes in, because you know there's 600,000 tons in certain areas of the US, in like in in Nola, I think there's, or maybe it's not 600, there's 300,000 tons in New Orleans and stuff like that.
00:30:35.680 --> 00:30:44.880
As anyone who's tracked aluminium knows, if a huge amount of material starts to start to be withdrawn from these warehouses, it can sometimes cause backlogs and problems.
00:30:45.039 --> 00:30:55.599
So logistically, they might just want to play it safe and keep on importing material because they're they're more confident it will cross the border quickly than than than come out of warehouses quickly.
00:30:55.839 --> 00:31:08.559
Um so you might see a slightly odd situation where lots of material still heads to the US, but it won't be more than demand, it won't be a front loading of things if the tariff has come in and is stable, or if there's no tariff.
00:31:08.720 --> 00:31:13.680
And so you'd start to see units seep into the broader world market um by proxy.
00:31:13.839 --> 00:31:17.200
Basically, if loads of Chilean stuff's going to the US at the moment, it then needs a home.
00:31:17.279 --> 00:31:21.759
It needs somewhere to find out, somewhere to go, and that precious premium doesn't make the market really loose.
00:31:21.920 --> 00:31:42.880
And this is why European participants don't want to agree to huge amounts of units because they don't know that the premiums could be record-breaking highs next year on the spot market, or they could be really low, they could be significantly lower than spot levels we've seen recently, because there'll be a flood of material into the into the region.
00:31:42.960 --> 00:31:45.279
So it's I think it's just such uncertainty.
00:31:45.519 --> 00:31:54.079
Um, and I and I guess if if you were listening to this podcast hoping for some clarity on anything, I've just given you food for thought and and not much of that.
00:31:54.319 --> 00:31:56.319
Um but that's kind of where we are.
00:31:56.400 --> 00:32:05.359
And and like I say, Cesco week is just a couple of weeks away or three weeks away, and these conversations will start up again, hopefully, with a little bit more clarity.
00:32:05.440 --> 00:32:11.039
I mean, you know, um sometimes the these conferences, you know, you get big news at them.
00:32:11.119 --> 00:32:15.279
If the if with tariff announcement happens mid-Sesco week, I mean that's gonna be a fun, that's gonna be a fun one.
00:32:15.519 --> 00:32:30.720
Yeah, it's it's a shame we can't sit here end of LME week and and state with confidence that you know the market seems to be in general consensus about XYZ and you know it's only reconfirmed, benchmark's position, this you know, we believe with with good confidence will happen.
00:32:30.880 --> 00:32:32.559
Um, we're not in that environment.
00:32:32.720 --> 00:32:37.920
So, like I said, it does seem to be a world that is uh incredibly varied in terms of opinion.
00:32:38.160 --> 00:32:46.400
Um pricing, again, on the low and high side is probably some of the widest I've ever seen, uh and again justifiable in each of those scenarios, which is a weird world that we live in.
00:32:46.480 --> 00:32:50.960
So we've covered tariffs, we've covered uh TCs, we've covered you know impact of pricing.
00:32:51.119 --> 00:32:51.920
Is there anything else?
00:32:52.079 --> 00:33:00.720
Any last-minute closing comments, um, any other bits of information you want to pass on to a listener's post all of your many, many meetings and uh events as well.
00:33:03.200 --> 00:33:08.400
No, I actually I was thinking about it, I was trying to think of something fun, something insightful to say.
00:33:08.880 --> 00:33:12.720
No, I think our listeners have probably hadn't had had enough of me at this point.
00:33:12.880 --> 00:33:17.759
Um I've certainly had maybe I've had enough of talking about copper for it for a little while.
00:33:18.240 --> 00:33:19.920
You've had enough of yourself, is what you're saying.
00:33:20.079 --> 00:33:20.960
Yeah, yeah, exactly.
00:33:21.039 --> 00:33:24.640
I'm glad I'm going on holiday next week and not having to think about copper so much.
00:33:24.880 --> 00:33:28.640
Um look, I mean, keep an eye out for Cesco Shanghai.
00:33:29.039 --> 00:33:34.000
It's it's gonna be a really big meeting.
00:33:34.240 --> 00:33:36.079
Expect the unexpected.
00:33:36.400 --> 00:33:39.359
It's you know, the price could be doing anything.
00:33:39.599 --> 00:33:43.519
The um, you know, we just we really don't know.
00:33:43.599 --> 00:33:48.480
I I've never, you know, uh what's what's good is it's I don't know and no one knows.
00:33:48.640 --> 00:33:57.839
Um sometimes you feel other people have really good clarity on things and and you're sort of struggling to agree with them or struggling to make your views.
00:33:58.160 --> 00:34:09.119
But it's there is one man sat in the White House who will impact everything about cathode premiums, everything about price action.
00:34:09.360 --> 00:34:14.320
And that back feed that that then feeds into smell smelter profitability.
00:34:14.480 --> 00:34:16.159
We're in a very different situation with that.
00:34:16.239 --> 00:34:19.519
I think that's maybe that that connection is something I'd like to restate.
00:34:19.760 --> 00:34:37.840
Is that last year it made sense for some of these smelters to agree pretty aggressive TCs because they knew they were selling premiums for really high level, and it made sense for for traders to make deals that involved cathode buybacks and and all sorts of things to facilitate the move of material to the US.
00:34:38.079 --> 00:34:42.000
Now, we don't know what will happen come January 1st.
00:34:42.159 --> 00:34:51.599
So I would argue, firstly, there will be, in theory, less positioning from traders to to make that arbitrage trade because they just don't know what the situation was will look like.
00:34:51.760 --> 00:34:54.480
There is more of a risk that the tariff comes in.
00:34:54.639 --> 00:34:56.639
Maybe that's the difference between this year and last year.
00:34:56.800 --> 00:35:06.800
No one thought a tariff was coming in 2026, but they thought it might be coming in 2027, or that if it did come in 26, it would be late enough, you'd be able to play it, you just want the units to play around with it.
00:35:06.960 --> 00:35:14.079
If you're a trader going into annual discussions for cathode, you don't know if you're going to be able to make any money off those trades at the moment.
00:35:14.239 --> 00:35:23.039
Some of them, some of them will be positioning more aggressively than others, and maybe listening to this thinking you're you're wrong, and and you know, we've we've gone long and gone hard.
00:35:24.000 --> 00:35:29.119
But you know, that uncertainty will will feed back into the TC situation.
00:35:30.079 --> 00:35:32.719
So it's uncertainty built on uncertainty.
00:35:33.039 --> 00:35:34.559
These are not different factors.
00:35:34.880 --> 00:35:39.760
You know, the the the cathode market and the conks market are quite different at the moment.
00:35:39.920 --> 00:35:44.639
The conks market is unbelievably tight and the cathode market is pretty loose.
00:35:45.519 --> 00:35:48.800
But in this specific area, the factors feed into each other.
00:35:49.039 --> 00:35:53.199
If a tariff comes in, you know, maybe I'll leave leave with a hypothetical situation.
00:35:53.840 --> 00:36:15.119
If the US government announces in November a 15% tariff starting January 1st and rising to 30% in January 1st, 2028, A, a lot of traders will be able to get material into the US before January 1st, 2027 because six weeks is enough to get stuff from Europe, it's enough to get stuff from some parts of the world into the US.
00:36:16.320 --> 00:36:18.960
So, firstly, you'll see a big flow of material into the US.
00:36:19.599 --> 00:36:32.960
You will also see elevated prices because every trader will want to get as much material as possible that is CME registered into the US across 2027 to play that forward curve.
00:36:34.480 --> 00:36:39.199
That will then help the smelters because the smelters is cathode will be worth so much more.
00:36:39.280 --> 00:36:50.800
And some of these traders, your all of the big traders, Traffee, Glencore, Vittol, Mercuria, Gumva, have books of cathode and concentrates and then can leverage those things to complement each other.
00:36:51.360 --> 00:37:06.480
So if the tariff comes in, that that situation, you know, it will help the smelters because their cathode will be worth a lot more, and you know, it will push up the prices, which could could help certainly Chinese smelters as well because of the free metal they get.
00:37:06.800 --> 00:37:10.880
So um maybe that's the hypothetical situation I want to paint.
00:37:11.039 --> 00:37:16.800
And in that situation, European European premiums go crazy, the copper price goes crazy.
00:37:17.039 --> 00:37:22.159
Um so and then inversely you have the exact opposite happening for a number of those factors.
00:37:22.239 --> 00:37:26.000
So it's it's really unsure, but maybe just imagine what that situation looks like.
00:37:26.079 --> 00:37:36.960
Um and and have a nice rest over the weekend and try and uh not think about metal, maybe not drink so much as you were doing this week if you were in London.
00:37:37.119 --> 00:37:41.840
And um yeah, yeah, look forward to our episode in three weeks' time.
00:37:42.079 --> 00:37:52.000
Uh, if we can if we can record it without with with with ch in China, I don't know if Riverside is is uh beyond the the great firewall, but we'll we'll know soon enough.
00:37:52.480 --> 00:37:57.840
We'll work it out, and and you're gonna you're gonna shed a load more clarity um on things.
00:37:57.920 --> 00:38:00.159
But no, I think um your takeaways are right.
00:38:00.400 --> 00:38:02.320
Uncertainty built on uncertainty.
00:38:02.480 --> 00:38:08.960
It seems to be that uh everything sits on a penstroke or a tweet or a truth um from one mind.
00:38:09.039 --> 00:38:13.119
So with that crazy closing comment, I think let's draw us to a close, Abbott.
00:38:13.280 --> 00:38:17.679
Thanks again for all your comments, your thoughts, your meetings in time with everyone this week.
00:38:17.760 --> 00:38:21.679
Uh it's really helpful and insightful despite not being able to give us uh much much clarity.
00:38:21.760 --> 00:38:24.159
But um that that could and should come over time.
00:38:24.239 --> 00:38:29.199
But um, thanks again to everyone tuning in, listening to Benchmarks Copper Weekly, and uh have a good weekend.
00:38:29.360 --> 00:38:30.239
Thanks everyone.
00:38:30.639 --> 00:38:35.039
If you found the show useful, follow us on Spotify so you don't miss next week's episode.
00:38:35.199 --> 00:38:42.079
For deeper analysis and data on copper supply, demand and prices, visit benchmarkminerals.com forward slash copper.
00:38:42.400 --> 00:38:46.559
Thanks for listening and join us next week as we break down the latest moves in the copper market.
00:38:47.039 --> 00:38:48.079
Bye for now.
00:00:01.040 --> 00:00:04.639
Hello and welcome to Copper Weekly, a benchmark podcast.
00:00:04.799 --> 00:00:15.439
I'm Michael Finch, Head of Strategic Initiatives, and with me we have Albert Mackenzie, Copper Analyst and Market Reporter, where each week we'll unpack what really moved the copper market and what to watch in the coming days ahead.
00:00:15.599 --> 00:00:17.839
Along the way, we'll be joined by a number of guest speakers.
00:00:17.920 --> 00:00:22.160
So kick back, relax, and enjoy this quick download on Everything Copper.
00:00:23.440 --> 00:00:26.239
Welcome back to Benchmarks Copper Weekly.
00:00:26.719 --> 00:00:28.719
We sat here on a Friday.
00:00:28.800 --> 00:00:31.280
It's the tail end of LME week.
00:00:31.359 --> 00:00:32.640
So lots to lots to unpack.
00:00:32.719 --> 00:00:35.119
Excuse any slightly shaky voices.
00:00:35.200 --> 00:00:37.200
It's been a long week, lots of talking.
00:00:38.000 --> 00:00:45.280
Albert's joining us again, and we can really get um his latest takes, um, any key gossip, any bits of information.
00:00:45.439 --> 00:00:47.359
But um Albert, how are you doing?
00:00:47.840 --> 00:00:50.079
I'm doing very, very well.
00:00:50.399 --> 00:00:53.840
Um I am completely knackered.
00:00:54.240 --> 00:01:03.039
Um in I I realize I've I've worked essentially every day since Wednesday last week, and I've had a couple of 14, 15-hour days this week.
00:01:03.200 --> 00:01:06.000
So I am a little bit worse for wear.
00:01:06.239 --> 00:01:14.879
Um and I'm I you know what something good is I'm sober for the first time in about a week, which is nice.
00:01:15.200 --> 00:01:25.280
Um I think I think the exasperation of what LME does to you means that from about lunch uh every day during LME week, someone always suggests a pint.
00:01:25.439 --> 00:01:26.719
So that's that's nice.
00:01:26.879 --> 00:01:32.079
And I've got um again taking taking the lead from our colleague Alex, let's some small talk.
00:01:32.159 --> 00:01:33.040
I've got a gig this evening.
00:01:33.120 --> 00:01:35.280
I'm I'm playing um playing in my band.
00:01:35.359 --> 00:01:43.120
Um and hopefully actually I've invited someone I had a meeting with this morning, so there might be um a miner mining company in attendance.
00:01:43.680 --> 00:01:49.680
Well, maybe your your LME week's not quite over, but uh you do have XFOF as well, so you can't can't complain too much, but uh well timed.
00:01:49.920 --> 00:01:50.319
I can't complain.
00:01:50.959 --> 00:01:51.680
Yeah, well timed.
00:01:51.840 --> 00:01:52.400
Yeah, exactly.
00:01:52.560 --> 00:01:55.760
Um it's like I said, it's been a hectic LME week.
00:01:55.840 --> 00:01:59.599
I know many of probably our our listeners are feeling the same.
00:01:59.680 --> 00:02:03.840
Um hopefully some fruitful meetings, hopefully some interesting sessions that everyone joined.
00:02:03.920 --> 00:02:06.480
But yeah, I really want to get your take on things, Albert.
00:02:06.560 --> 00:02:07.920
What are you seeing and hearing?
00:02:08.000 --> 00:02:09.759
And and I was gonna ask a question.
00:02:09.919 --> 00:02:13.520
I don't just want to hear about the areas where everyone is in agreement.
00:02:13.599 --> 00:02:18.080
And uh you made a funny quote just before we joined this, where are people agreeing?
00:02:18.159 --> 00:02:22.560
So maybe we should maybe we should look at uh it in two two minds.
00:02:22.639 --> 00:02:24.400
But um, what yeah, what's your major takeaways?
00:02:24.719 --> 00:02:26.000
Let's let's dive into it.
00:02:26.560 --> 00:02:39.919
I would say without being too defeatist about what this week has done, it felt felt as close to pointless as any fest uh conference I've ever been to.
00:02:40.159 --> 00:02:42.080
It was interesting, and I and I did find it interesting.
00:02:42.159 --> 00:02:48.400
I heard a lot of good gossip and I heard a lot of interesting news and had some really interesting discussions, right?
00:02:48.719 --> 00:02:52.000
But normally you have a clearer idea on what's happening next.
00:02:52.159 --> 00:03:02.080
Like there's I guess there's a couple of reasons you go to a conference, you want to know what's already happened, you want to take away some new understanding of the market, but you also want to know what's gonna happen next.
00:03:02.400 --> 00:03:06.879
Yeah, you want to find consensus amongst you know all of your meetings, and yeah, yeah.
00:03:07.599 --> 00:03:16.879
And I would say we're caught the LME is taking place just before a couple of really big updates.
00:03:17.199 --> 00:03:28.879
So we don't know what's gonna happen with US tariffs, and everyone expects to have some potential update um before the new year, but after midterms.
00:03:29.039 --> 00:03:32.479
Yeah, and we also don't know what's happening with copper concentrate TCRCs.
00:03:32.560 --> 00:03:34.479
You know, the market is super aggressive.
00:03:34.639 --> 00:03:35.520
It is unclear.
00:03:35.680 --> 00:03:40.479
Normally at this point, we'd be talking about what do you think the benchmark is going to be.
00:03:40.560 --> 00:03:42.879
And this year it's do you think there'll be a benchmark?
00:03:43.039 --> 00:03:44.879
If there's not a benchmark, what will happen?
00:03:45.120 --> 00:03:46.560
If so, what number will it be?
00:03:46.719 --> 00:03:50.000
It's sort of, you know, no one seems to want to put their foot down.
00:03:50.080 --> 00:03:54.800
And we've actually heard a number of participants, certainly like a number of smelters are being very coy.
00:03:54.879 --> 00:03:56.879
They don't want to show their hand too much.
00:03:57.039 --> 00:04:01.520
Um, no one even seems to know who's I mean, this is quite interesting.
00:04:01.680 --> 00:04:04.960
I think I've now got a good idea, but I want to double check it.
00:04:05.120 --> 00:04:11.360
But normally the the Chinese smelting industry is led by a specific smelter, right, in their discussions.
00:04:11.599 --> 00:04:13.840
No one even knows who's doing that, right?
00:04:13.919 --> 00:04:22.079
That's like the level of uncertainty we have is like some people like who who who will be leading these discussions, um, and that's unclear.
00:04:22.319 --> 00:04:33.279
The other thing is it's a big time, certainly for European participants, where they lock in long-term units and normally have a an idea about how much they're gonna lock in and at what level.
00:04:33.439 --> 00:04:40.160
Now we have an idea of the level because Arubis and Cadelco, and we'll circle back to that in a sec, have offered their premiums.
00:04:41.279 --> 00:04:53.040
But my understanding from a lot of people I've spoken to is everyone wants to wait until the the the final hour before deciding how much to allocate to next year.
00:04:53.120 --> 00:04:55.839
Because this year premiums have been under pressure in Europe.
00:04:56.240 --> 00:05:03.680
Um and without a tariff pull, it becomes really hard to justify such high premiums.
00:05:03.920 --> 00:05:09.040
The market in Europe would likely be really loose, but no one knows whether a tariff's coming or not.
00:05:09.199 --> 00:05:16.560
So we're kind of, you know, we've got conversations around concentrates and conversations around cathode are both reliant on two things that we we don't know.
00:05:16.720 --> 00:05:30.079
And that there's there's almost a symbiotic relationship between those two as well, because last year we saw smelters push to get extra units on the conch side, having already secured really good cathode sales.
00:05:30.319 --> 00:05:39.839
So one of the one of the East Asian smelters, ex-China, last year apparently agreed this massive deal with huge premiums with a couple of traders for like 150 KT.
00:05:40.240 --> 00:05:43.519
It then made sense for them to go out and be aggressive on conks.
00:05:44.160 --> 00:05:48.639
But those traders and and and everyone doesn't know what what the tariff situation will look like next year.
00:05:48.720 --> 00:05:58.160
So we're it's just a cloud of uncertainty, um, which you know, and I often say this when I leave it, oh, I've left with more questions than answers.
00:05:58.480 --> 00:06:05.040
But I really have this year, and and and also we are sometimes LME weeks quite early in October.
00:06:05.199 --> 00:06:16.879
We are very late in October, and Cesco Shanghai is in uh three weeks' time, so there's a there is a good cause to just kind of go, why don't we wait until at least then?
00:06:17.120 --> 00:06:24.000
You know, midterms, tariff situation, and TCRCs will all be more might be more clear then.
00:06:24.480 --> 00:06:26.079
Might be, which is a the key thing.
00:06:26.160 --> 00:06:27.759
And uh I think you're you're absolutely right.
00:06:27.839 --> 00:06:33.600
And it also feels like no one's willing to show their hands, no one wants to be first to show their hands, right?
00:06:33.680 --> 00:06:40.720
So there's it's there's real wait and see and hold off attitudes um until a few key things are lined up.
00:06:40.800 --> 00:06:44.160
Like I said, maybe maybe there might be more clarity on the tariffs post-midterms.
00:06:44.319 --> 00:06:46.240
We don't know that, and that's that's the risk, right?
00:06:46.319 --> 00:06:50.959
But how long can people keep kicking the can down the road, I suppose, is is a question for you, Albert.
00:06:51.279 --> 00:06:54.720
Specifically thinking related to benchmark discussion.
00:06:55.040 --> 00:07:00.879
Yeah, so so benchmark can go on forever, really, or forever's an exaggeration.
00:07:00.959 --> 00:07:02.560
Benchmark can go on for a very long time.
00:07:02.800 --> 00:07:04.480
We've seen that in the last few years.
00:07:04.639 --> 00:07:22.560
That um the last time I might be corrected by someone, I think the last time it was actually agreed during Cesco week was the 88 number, which was so since then we've had zero, 22.25, and then the year before was 80 and 8.
00:07:22.639 --> 00:07:24.959
So I think that was a benchmark for 2024.
00:07:25.360 --> 00:07:33.600
Um, that was actually agreed in Shanghai on the final day or the Saturday, like I think literally the Saturday morning or the Friday evening or something.
00:07:33.680 --> 00:07:35.199
That was what that was when that happened.
00:07:35.439 --> 00:07:38.959
Other than that, it's been prolonged and protracted discussions.
00:07:39.360 --> 00:07:45.680
Um, I did ask a number of copper cathode participants in Europe, because they've said, look, it's wait and see.
00:07:45.839 --> 00:07:49.040
And I was basically long, how how how long can you wait and see?
00:07:49.199 --> 00:07:53.360
And they said, to be fair, we can most people can wait until at least December.
00:07:53.600 --> 00:08:03.839
Um, the fear of acute tightness, if the offers are out, you know, Arubus have put out their offer, Cadelka have put out their offer, European customers are important to those companies.
00:08:04.160 --> 00:08:10.959
If the offers are there, those consumers, those traders probably have the potential to to wait, you know.
00:08:11.120 --> 00:08:19.680
There is no rush for them to agree, you know, before the beginning of November, before the end of, you know, some people say, look, it's the normal process takes weeks anyway.
00:08:19.920 --> 00:08:21.279
You know, people have to say tons.
00:08:21.439 --> 00:08:25.600
But what's interesting is some people aren't even saying how much tonnage they want.
00:08:25.759 --> 00:08:31.199
Which normally one of the traders I spoke to was like, normally you get a good idea of how much tonnage people want.
00:08:31.439 --> 00:08:37.200
You might then have to, you know, discuss the minutiae and send people contracts, and it takes a couple of weeks.
00:08:37.279 --> 00:08:40.159
But this year that people are being very coy about that as well.
00:08:40.320 --> 00:08:45.440
Um, but certainly I think it is worth waiting until after the midterms, those are next week.
00:08:45.600 --> 00:08:52.799
The US administration might come out swinging afterwards and and announce the tariff, and and there was a rumour going round.
00:08:52.960 --> 00:09:06.080
I say a rumour, a trading company was telling everyone that their belief was that the tariff will become clear between um the midterms and and and uh Thanksgiving, which I think is actually like a two-week period.
00:09:06.639 --> 00:09:12.320
So anyone who believes that will will wait until then and there's no urgency.
00:09:12.480 --> 00:09:14.159
There's no urgency to make that decision.
00:09:14.320 --> 00:09:17.360
So so it can be kicked down the the road a little bit.
00:09:17.679 --> 00:09:27.120
Um Antofagasta and the Chinese Motors on the TC side don't normally start discussing like real numbers at LME week anyway.
00:09:27.279 --> 00:09:45.279
They have their sort of preliminary discussions and try and make things, you know, that they you know, there's been rumors of of of certain levels circulating this week, and we've heard, you know, I'm sure anyone who's in the TC space has heard a number of, oh, this smelter offered that, and this melter offered that, and Antifagasta said this, and Antifagasta said that.
00:09:45.440 --> 00:09:53.519
But actually, I think in terms of like official, this is the number we want, that doesn't even happen until Shanghai or the week before, anyway.
00:09:53.759 --> 00:09:55.679
So it can be prolonged a little bit.
00:09:55.840 --> 00:09:58.159
Um, and and the acid price as well.
00:09:58.240 --> 00:10:06.879
I mean, add another uncertainty into the market is you know, currently the high acid price is supporting the uh Chinese smelters.
00:10:07.200 --> 00:10:08.720
Could it go higher?
00:10:08.960 --> 00:10:24.000
There is talk of you know a large buildup of uh fertilizer in in China, and maybe the export ban on that gets lifted, the export ban on sulfuric acid gets lifted, the prices start going back up, or does a straight-of-hore moose reopen and then prices start going down?
00:10:24.080 --> 00:10:29.279
And and it's just sort of like fumbling around in the dark trying to work out what the best thing is.
00:10:29.919 --> 00:10:31.360
It's a huge swing factor, right?
00:10:31.440 --> 00:10:45.679
For for you know, small profitability right now, and and if a benchmark is settled at minus whatever it is, 180, and if sapphiric acid prices you know completely come off the boil, it's it it the economics are really tough to to stack up and justify.
00:10:45.759 --> 00:10:54.879
So I suppose the question is Albert, in your gut take, or if you were to try and form a consensus on whether or not a benchmark will be settled, what what's your your feeling here?
00:10:55.200 --> 00:10:59.440
I would say going into the week, I wouldn't I would have been 50-50.
00:10:59.600 --> 00:10:59.919
Yeah.
00:11:00.080 --> 00:11:27.919
Um, and actually I spoke to a big mining company and they agreed with basically what you just said that the uncertainty was be sufficient that actually maybe spot-linked indexes might take precedence because you don't want to go in if you're a smelter or any business and you're buying loads of something and you're selling loads of something, you kind of want to be as exposed to the spot on both sides.
00:11:28.080 --> 00:11:37.200
You don't or like if you're really long-term on one side and really long-term on the other, you can kind of see at the beginning of the year what what your profitability was going to be.
00:11:37.360 --> 00:11:48.879
But if you leave yourself fluctuating on one side, as for example, the Chinese might with the acid, you might want more ability to fluctuate on the other, because the higher the acid goes, the lower TCs go.
00:11:48.960 --> 00:12:01.360
But inversely, if you you know, spot levels are minus 250 at the moment, say say uh uh, you know, those are for marginal units, so people don't necessarily believe that smelters could survive buying all their tons there.
00:12:01.440 --> 00:12:07.519
But say you um agreed a number of your units that minus 150 for benchmark.
00:12:07.759 --> 00:12:12.879
If the acid price was to tank, that would really impact the smelter's profitability.
00:12:13.039 --> 00:12:28.320
So some of the miners were like, maybe they maybe they'll want floating units just because they're so beholden on the sale side that they don't want to become too beholden on the buy side as well, to to you know, to to set number while their sale number is fluctuating.
00:12:28.720 --> 00:12:35.519
However, basically everyone thinks the Chinese will want a set number, the Chinese will want a specific number.
00:12:36.399 --> 00:12:41.120
What becomes unfathomable is if that number is minus 150, say.
00:12:41.759 --> 00:12:42.799
Let's be real here.
00:12:42.960 --> 00:12:47.679
You know, the the the spot market is minus 250.
00:12:48.879 --> 00:12:53.440
I don't see Antifagaster agreeing at zero, certainly not.
00:12:54.000 --> 00:12:57.919
Minus 50 also seems too conservative.
00:12:58.000 --> 00:13:03.360
I you know, I think realistically there was a rumour going round that Antefagasra were asking for negative triple digits.
00:13:03.440 --> 00:13:04.320
I heard it loads of times.
00:13:04.399 --> 00:13:13.519
I don't believe that rumour is necessarily true, but the reason it was going round and the reason rumors like that spread is because that's believable.
00:13:13.600 --> 00:13:16.159
Yeah, that's sort of what people are expecting anyway.
00:13:16.320 --> 00:13:29.279
I I I went for lunch with someone yesterday and all of our we we we we sort of did a time a time box to sort of open again next LME week and what we thought about a load of stuff, and and we all thought TC's in the minus hundreds, right?
00:13:29.360 --> 00:13:30.799
That's for for benchmark.
00:13:31.039 --> 00:13:37.440
So if we uh agreed, if we say you know TC's benchmark might be in the minus hundred levels, right?
00:13:37.519 --> 00:13:44.559
And but I can't see that being accepted elsewhere, and I'm I'm sort of indicating here perhaps the the Japanese.
00:13:44.799 --> 00:13:46.080
What's your take?
00:13:46.399 --> 00:13:52.559
Yes, I think there's a strong possibility that those numbers aren't appealing to people outside of China.
00:13:52.799 --> 00:13:58.559
Um China have a lot of advantages over some other smelters, they're very new.
00:13:58.720 --> 00:14:02.320
Um, lots of them are state-owned enterprises.
00:14:02.639 --> 00:14:07.279
Borrowing costs in China are a very different picture to other markets.
00:14:07.360 --> 00:14:09.120
I mean, lots of the regions have their own benefits.
00:14:09.279 --> 00:14:22.639
Japanese smelters sell CAFO to India at a at a really high premium because of an import duty um thing that they can get round, like they're duty-free imports into India and no one else is, so they can make loads of money.
00:14:22.799 --> 00:14:29.519
Indian smelters get the same increase in duty, and European smelters have really good premiums, and a number of other things.
00:14:29.759 --> 00:14:47.600
So it's not just about TCs, but you know, the Chinese are arguably are more able to deal with or are able to deal with these aggressive TCs, and a number of smelters from the rest of the world are kind of like, this is pretty hard to this is you know pretty challenging to actually handle right now.
00:14:48.080 --> 00:14:55.919
The other thing is, I mean, we know that smelters from every region have bought at negative TCs at some point.
00:14:56.480 --> 00:15:09.360
Um we've even heard Japanese smelters have bought at negative TCs, which sort of surprised me when I heard it because you know we thought they weren't super active in the spot market, but um you know sources have told us that that's happening.
00:15:09.600 --> 00:15:15.279
I think the other thing is what it does to the long-term perception about their own businesses.
00:15:15.840 --> 00:15:25.840
If you TCs traditionally are these fees that are charged to smelters, if the smelters suddenly have to start paying the miners for that copper, what does that mean?
00:15:25.919 --> 00:15:29.519
Is it precedent setting to say we can take negative TCs?
00:15:29.919 --> 00:15:42.480
Um, is it semantically unappealing that you are paying someone more for the in theory more for the value of the copper than the the copper is worth and you haven't even turned it into the the cathode yet?
00:15:43.120 --> 00:15:49.600
Now, the longer you push that argument, you kind of come up with a few alternatives.
00:15:49.919 --> 00:15:54.720
Either ex-China smelters go minus 120, not worth it.
00:15:54.879 --> 00:15:56.080
We disagree.
00:15:56.720 --> 00:16:00.080
They either have the option to shut or to work something else out.
00:16:00.240 --> 00:16:07.679
They need units, they cannot refuse to accept uh aggressive TCs and continue operating.
00:16:07.840 --> 00:16:08.720
They need units.
00:16:08.879 --> 00:16:12.960
That's the that's the thing here is so so do they then give up side terms?
00:16:13.120 --> 00:16:14.879
Do they then make other arrangements?
00:16:15.039 --> 00:16:30.879
You know, we understand that um a major mining company, uh a major trading company who didn't have access to any cathode that they were producing themselves made a deal with an East Asian smelter last year to essentially toll through their smelter.
00:16:31.039 --> 00:16:41.200
So it's boosting the smelter's utilization rate, they got a bit of the acid and some other stuff, and the min uh the trading company got a load of cathode for free, which they then sent to the the US.
00:16:41.360 --> 00:16:44.000
Now, do we start seeing those sorts of arrangements?
00:16:44.080 --> 00:16:52.559
We've heard BHP and Antifagasta have done deals whereby they receive the acid back from those transactions.
00:16:52.720 --> 00:16:54.960
I don't I I you know I don't know the how it works.
00:16:55.120 --> 00:17:00.559
They might be buybacks, it might be you know tolling, it might be favorable premiums, whatever it is.
00:17:00.879 --> 00:17:09.119
But companies like Antifagasta who have SXEW production, companies like BHEP who have SXEW production need acid.
00:17:09.440 --> 00:17:11.279
So do we start seeing other deals?
00:17:11.359 --> 00:17:13.039
And that's maybe what we'll see.
00:17:13.279 --> 00:17:15.839
We'll see a very murky picture.
00:17:15.920 --> 00:17:20.319
I you know, I said that LME week has left me confused and a bit murky.
00:17:20.799 --> 00:17:24.079
Well, we might be feeling the same in six months' time.
00:17:24.319 --> 00:17:31.200
We might have a headline number for the Chinese and a load of deals that we hear that we just don't understand.
00:17:31.599 --> 00:17:34.960
Because you know, the TCRC is one number.
00:17:35.279 --> 00:17:41.359
Traditionally, the other side terms were more known and more stable.
00:17:41.440 --> 00:17:47.920
Now, I'm not saying that it was always really transparent and it's become really opaque, but they were more known and they were more stable.
00:17:48.160 --> 00:17:52.880
There were standard gold payables, there was, you know, we weren't seeing necessarily huge amounts of acid buyback.
00:17:53.119 --> 00:17:58.799
So you could kind of look at a handful of deals and they'd all be different, but you'd have a rough idea.
00:17:58.960 --> 00:18:01.839
But we could see huge disparity.
00:18:02.000 --> 00:18:15.920
You know, I I said to someone, if if I hear a Japanese smelter's bought annual units for ten dollars, positive, I wouldn't be shocked, I just wouldn't know every other detail, and therefore I would I wouldn't know why they'd managed to get that deal.
00:18:16.160 --> 00:18:18.160
And and I think that's what will really confuse us.
00:18:18.319 --> 00:18:27.440
What I will say is there will be a tentativeness to giving up beneficial payment terms and and side terms.
00:18:27.759 --> 00:18:39.519
So if the you know, the moment we've heard that Chinese smelters, some Chinese smelters are buying gold at far higher payability thresholds than than they used to, just to be more competitive.
00:18:40.160 --> 00:18:52.880
Now, you know, another thing is at the moment um standard payment terms have a sort of um I think it's 96.5% payability on the copper contained in concentrate.
00:18:53.119 --> 00:18:59.680
Now you could move the TC quite a lot if you change that to 97% or 97.5 or 98%, right?
00:18:59.839 --> 00:19:01.039
And it would make the headline TC.
00:19:02.720 --> 00:19:03.119
Exactly.
00:19:03.200 --> 00:19:06.079
I mean you're you're moving money from one pocket to another, really.
00:19:06.319 --> 00:19:11.440
But if your semantic worry is that you're not getting paid for your treatment charges, you you might do that.
00:19:11.519 --> 00:19:11.839
Yeah.
00:19:12.160 --> 00:19:15.839
And you might treat your business more holistically and try and work out something like that.
00:19:16.079 --> 00:19:21.039
But then if you do concede those terms, do you get them back when the market turns?
00:19:21.200 --> 00:19:27.039
And that's that's the kind of debate that the smelters will be having.
00:19:27.359 --> 00:19:41.920
Do we, you know, I mean, some of them won't care about the the visuals that that they're you know agreeing to deeply negative TCs, it will be about, you know, I mean European Japanese um smelters hedged all their acid last year.
00:19:42.079 --> 00:19:50.640
You know, someone was telling me this morning that um the Japanese, lots of Japanese smelters are getting about half the value of the acid that they would if they were participating on the spot market.
00:19:50.799 --> 00:19:58.319
Now, as they position forward for next year for 2027, you'll see them make a lot more money on acid.
00:19:58.480 --> 00:20:04.640
Same with the Europeans, they'll make a lot more money on acid next year because they'll have agreed annual levels, and those annual levels will be higher.
00:20:04.799 --> 00:20:07.440
So maybe that gives them all leeway to move down, some other things.
00:20:07.519 --> 00:20:11.599
But it's it's gonna be baffling, it's gonna be absolutely highly nuanced, yeah.
00:20:11.839 --> 00:20:18.880
Yeah, and I think even the you know, the PRA indexes that track the market, even there, they're doing a very good job.
00:20:18.960 --> 00:20:24.559
And you know, I used to I used to work for one of them, and and I think they're doing a very good job of providing some transparency to the market.
00:20:24.799 --> 00:20:35.200
But every time someone agrees a deal with completely different side terms to another smelter, the numbers become harder and harder to understand on their own without context.
00:20:35.519 --> 00:20:39.920
And um, you know, there's talk of I think that's one of the other things.
00:20:40.000 --> 00:20:52.720
There was talk of more people using PRA indexes, and there's a question of how the hell do PRAs track a thousand different side terms on top of the TCRC, and how can we trust them?
00:20:52.960 --> 00:21:00.480
Yeah, not not trust them as individuals and trust them that they're doing their best job, but how do we trust this process and put it into contracts?
00:21:00.559 --> 00:21:14.640
That's where it starts to become a challenging time, and I think it will be, you know, it'll probably be a very good time for them in a number of ways because there's probably going to be more units signed to their indexes next year, but it's gonna be bloody hard work, um, and there'll be a lot of challenges for them.
00:21:15.440 --> 00:21:15.839
Good.
00:21:16.000 --> 00:21:27.200
Should we talk about another area where seemingly everyone has a different opinion, but equally every single opinion we've heard could be easily defended, uh, and that's on the outcome of the tariffs.
00:21:27.440 --> 00:21:30.640
Not necessarily the outcome, but what will happen next with the tariffs?
00:21:30.880 --> 00:21:33.279
And you have a multitude of scenarios here.
00:21:33.359 --> 00:21:40.240
We have I think most people are in agreement, nothing before the midterms, but after midterms, maybe we might get clarity around Jan 27, 15%.
00:21:40.640 --> 00:21:47.680
Or we've heard it'll be Jan 1 and we'll wake up to uh a tweet or a truth saying, yep, today's a day for tariffs, so real late in the day.
00:21:47.759 --> 00:21:54.240
And then we've heard people saying that maybe there's going to be no visibility about that phase in 30% in Jan 28.
00:21:54.319 --> 00:21:56.640
Maybe there's ongoing strategic ambiguity.
00:21:56.720 --> 00:21:58.079
Maybe we don't hear anything at all.
00:21:58.160 --> 00:22:07.119
And again, is that a strategic play or is That just you know someone kicking the can down the road, or Trump's focus is elsewhere post perhaps not so positive results from the midterm.
00:22:07.279 --> 00:22:22.160
So, this is an area that everyone seems to disagree on, but equally I I get and understand everyone's opinion, but naturally that directly feeds into everyone's expectations of price forecast next year, um, or where prices will settle as an average for 27.
00:22:22.240 --> 00:22:34.240
And you could justify in nothing, we can both sit here and justify easily a world where we see$9,000 uh dollars per ton pricing, or we see upwards of 16, 17, 18, 20.
00:22:34.319 --> 00:22:39.440
It just depends on the outcome of the discussions relating into tariffs.
00:22:39.599 --> 00:22:48.960
So maybe just I don't know, are there any key nuggets that you gleaned in your conversations that can help shed some light on what what might be the the thing people were most thinking?
00:22:49.039 --> 00:22:51.680
What's more aligned to consensus, I suppose?
00:22:52.000 --> 00:22:52.480
Yeah.
00:22:52.720 --> 00:22:55.599
Um yeah, it's it's it's murky.
00:22:55.759 --> 00:22:57.200
I think you've put it put it very well.
00:22:57.440 --> 00:22:59.119
There was one thing actually I wanted to mention.
00:22:59.279 --> 00:23:22.160
I was debating how to mention it, because I did hear a good nugget of of information, and I'm gonna share it with our listeners, but I'm going to urge I'm gonna phrase it as nuancedly as I can put it and as give as much context as I possibly can so people don't uh don't think I'm gossiping or anything or spreading rumors.
00:23:22.480 --> 00:23:35.519
We understand, and I I heard this LME week, that the US in August, the US Department of Commerce told a number of participants, or had a meeting with a number of participants about what might happen with the tariffs.
00:23:36.160 --> 00:23:59.920
And at that point, the picture becomes a bit murkier because some of the people in that room have reportedly said that they were being forewarned that a tariff was coming at 15% and then growing to 30%, which would obviously be very big news, very bullish, and give the impression that that that was US government policy.
00:24:00.319 --> 00:24:08.480
Some of the other people in the room, and this is where it becomes nuanced, and this is probably why um it hasn't been in the news because no one's been able to clarify this.
00:24:08.640 --> 00:24:24.880
Some of those participants said that the US Department of Commerce basically said the current policy, as stated in the 232 investigation, and this is true, as stated in the 232 investigation, is 15% tariff starting in 2027 and 30% tariff starting in 2028.
00:24:25.279 --> 00:24:29.359
And that they were just saying, you know, prepare as if that's still the case.
00:24:29.599 --> 00:24:36.400
And those two things are really different because one is just saying, look, it's status quo, we've we're not saying any update, the other is actually a warning.
00:24:36.480 --> 00:24:47.279
And I I I personally tend to just from some of the other bits of context I've heard, lean towards they were just restating what was already the case.
00:24:47.519 --> 00:24:51.519
But uh that rumour has been circulating around LME week, so I thought it was worth sharing.
00:24:51.680 --> 00:25:00.319
It also is feeding some of the trading companies think more bullishly about that, think that that is that they were warned because they were they were told.
00:25:00.559 --> 00:25:03.279
Um, you know, so that's that's one of the stories.
00:25:03.440 --> 00:25:16.559
And so that narrative, which I certainly didn't believe before that there would be a 15 rising to 30% tariff, now seems potentially more likely because of some of those rumours and stories.
00:25:16.799 --> 00:25:20.480
The other thing is that meeting took place in August.
00:25:20.799 --> 00:25:23.759
Is that still US government policy?
00:25:24.160 --> 00:25:26.319
It was also the Department of Commerce.
00:25:26.559 --> 00:25:33.599
Does the Department of Commerce know exactly what's going on in Donald Trump's head and you know, could the midterm results change that?
00:25:33.680 --> 00:25:36.559
Could you know still so much uncertainty, right?
00:25:37.519 --> 00:25:43.119
And the decision that's going to be made might not be known by anyone in the world at the moment.
00:25:43.200 --> 00:25:45.680
I think that's kind of where I'm I'm sat.
00:25:46.000 --> 00:25:54.880
What I will say is that we know from from trade data and people in the market, there's been a big push to get units into the US before 2027.
00:25:55.440 --> 00:25:59.200
Um we're expecting October to be record-high imports.
00:25:59.599 --> 00:26:06.559
Um there is a huge amount of bulk material heading over, according to sources we've spoken to in the market.
00:26:06.720 --> 00:26:19.920
The other thing is we've spoken to producers of of copper cathode who have said that some traders are trying to uh cancel contracts that would arrive into the US after January 1st.
00:26:20.160 --> 00:26:27.359
Again, the question is are these things reasonable behavior to alleviate some risk?
00:26:27.519 --> 00:26:30.480
And actually, you can interpret it one of two ways.
00:26:30.559 --> 00:26:41.759
You can say, Oh, this is a a sign that the the traders think it's it's coming, they're trying to get material in, they're trying to cancel stuff that's arriving after, but it's also just a reasonable thing to do.
00:26:42.000 --> 00:26:46.640
No one knows do you want a load of copper to arrive after it would have to pay a gigantic tariff?
00:26:46.799 --> 00:26:47.519
Probably not.
00:26:47.680 --> 00:26:48.799
Is it worth risking it?
00:26:48.880 --> 00:26:50.240
How much money are you gonna make?
00:26:50.400 --> 00:26:53.359
Is it it's just a a play on that thing.
00:26:53.680 --> 00:26:54.240
I agree with that.
00:26:54.319 --> 00:26:55.759
I don't think you can look into that too much.
00:26:55.839 --> 00:26:58.079
I think that's just sensible, sensible business there.
00:26:58.640 --> 00:26:59.680
Yeah, exactly.
00:26:59.839 --> 00:27:10.319
And and what I would say is in the situation where there's my personal view before LME week is that Donald Trump, when he puts in a tariff, he puts in a big one and then leaves it there.
00:27:11.200 --> 00:27:21.680
But my a number of people have said basically you do that, the CME starts to draw down material, the US loses this stockpile of material that they've may think is a good thing.
00:27:21.839 --> 00:27:23.680
They've got you know, I've heard estimates this week.
00:27:23.759 --> 00:27:39.359
We our estimate will be 1.8 million by the end of the year, but someone else has said over well over 2 million, which I can I can actually believe because since we've put together that data, we've heard more and more talk about increased imports arriving into the US before January 1st.
00:27:39.440 --> 00:27:42.240
So that that might you know supercharge, could creep up, right?
00:27:42.319 --> 00:27:44.240
Yeah, could creep up, yeah, exactly.
00:27:44.480 --> 00:27:48.720
Um so do they want to lose that material?
00:27:48.880 --> 00:27:51.039
Do they think it's strategically important to have it?
00:27:51.119 --> 00:28:03.680
I mean, I I my personal view is the US doesn't need a gigantic stockpile of copper for like two years worth of imports or three years worth of, I mean, if it gets to two million tons, it's like four years worth of imports of copper, they don't need it.
00:28:04.079 --> 00:28:07.440
Um but may they may disagree.
00:28:07.519 --> 00:28:15.039
And if you have a rising tariff, it goes 15 and then 30%, that continues the flow of material because people can still play that arbitrage.
00:28:15.119 --> 00:28:44.240
Um and it will actually probably draw in even more material because if it's guaranteed, if they say 15 now, 30 later, and they say that, the forward curve on the CME will go crazy, the arbitrage will go crazy, and it'll be worth paying the 15% tariff to then have that material in the US and either sit on it and deliver it to the exchange if you're convinced the 30%'s coming in after the day or sell it after the tariff increases or sell it on the curve, or just sell it to customers in the US who would be willing to pay the CME price, which will be far higher than the LME price.
00:28:44.559 --> 00:28:58.319
So that situation uh is very bullish, you know, very, very bullish copper prices, but also it would tighten, you know, ever almost every brand in Europe is now CME deliverable.
00:28:58.480 --> 00:29:04.079
So Rubis is CME deliverable, Bricksleg is CME deliverable, Atlantic Copper is, KGHM is.
00:29:04.160 --> 00:29:18.160
I don't I don't know about Boleiden, but I'm sure they're oh I guess Boleiden's tank house at Ronscar had it had issues and they've just restarted, so they might not I I I actually I don't know about Boleiden, but a huge amount of European production could in theory head to the CME.
00:29:18.480 --> 00:29:22.160
And therefore, that's dangerous for premiums.
00:29:22.480 --> 00:29:45.680
Now it it means that you might really struggle to get material next year, and actually Arubis's 347 deal looks like a good deal if the if the if a trader can make a 15% profit by shipping stuff to the US, that premium, you know, at$14,000 copper prices is far, far bigger than$340, and they might be able to outcompete people and make the market really tight.
00:29:46.000 --> 00:30:06.799
However, if the US nothing happens in November after the midterms, nothing happens in December, nothing happens in January, or that the US says we're not going to do a tariff, or they say we're doing a tariff and it's not growing, it's just coming in at 15% and it's gonna stay there, that's very bearish for copper.
00:30:07.039 --> 00:30:13.359
Because there would be a slowdown of this big pull of material into the US, and those units would have to find other homes.
00:30:13.519 --> 00:30:35.440
Now, an interesting point that one of our contacts made yesterday was that US participants are likely to keep on importing copper even if a tariff comes in, because you know there's 600,000 tons in certain areas of the US, in like in in Nola, I think there's, or maybe it's not 600, there's 300,000 tons in New Orleans and stuff like that.
00:30:35.680 --> 00:30:44.880
As anyone who's tracked aluminium knows, if a huge amount of material starts to start to be withdrawn from these warehouses, it can sometimes cause backlogs and problems.
00:30:45.039 --> 00:30:55.599
So logistically, they might just want to play it safe and keep on importing material because they're they're more confident it will cross the border quickly than than than come out of warehouses quickly.
00:30:55.839 --> 00:31:08.559
Um so you might see a slightly odd situation where lots of material still heads to the US, but it won't be more than demand, it won't be a front loading of things if the tariff has come in and is stable, or if there's no tariff.
00:31:08.720 --> 00:31:13.680
And so you'd start to see units seep into the broader world market um by proxy.
00:31:13.839 --> 00:31:17.200
Basically, if loads of Chilean stuff's going to the US at the moment, it then needs a home.
00:31:17.279 --> 00:31:21.759
It needs somewhere to find out, somewhere to go, and that precious premium doesn't make the market really loose.
00:31:21.920 --> 00:31:42.880
And this is why European participants don't want to agree to huge amounts of units because they don't know that the premiums could be record-breaking highs next year on the spot market, or they could be really low, they could be significantly lower than spot levels we've seen recently, because there'll be a flood of material into the into the region.
00:31:42.960 --> 00:31:45.279
So it's I think it's just such uncertainty.
00:31:45.519 --> 00:31:54.079
Um, and I and I guess if if you were listening to this podcast hoping for some clarity on anything, I've just given you food for thought and and not much of that.
00:31:54.319 --> 00:31:56.319
Um but that's kind of where we are.
00:31:56.400 --> 00:32:05.359
And and like I say, Cesco week is just a couple of weeks away or three weeks away, and these conversations will start up again, hopefully, with a little bit more clarity.
00:32:05.440 --> 00:32:11.039
I mean, you know, um sometimes the these conferences, you know, you get big news at them.
00:32:11.119 --> 00:32:15.279
If the if with tariff announcement happens mid-Sesco week, I mean that's gonna be a fun, that's gonna be a fun one.
00:32:15.519 --> 00:32:30.720
Yeah, it's it's a shame we can't sit here end of LME week and and state with confidence that you know the market seems to be in general consensus about XYZ and you know it's only reconfirmed, benchmark's position, this you know, we believe with with good confidence will happen.
00:32:30.880 --> 00:32:32.559
Um, we're not in that environment.
00:32:32.720 --> 00:32:37.920
So, like I said, it does seem to be a world that is uh incredibly varied in terms of opinion.
00:32:38.160 --> 00:32:46.400
Um pricing, again, on the low and high side is probably some of the widest I've ever seen, uh and again justifiable in each of those scenarios, which is a weird world that we live in.
00:32:46.480 --> 00:32:50.960
So we've covered tariffs, we've covered uh TCs, we've covered you know impact of pricing.
00:32:51.119 --> 00:32:51.920
Is there anything else?
00:32:52.079 --> 00:33:00.720
Any last-minute closing comments, um, any other bits of information you want to pass on to a listener's post all of your many, many meetings and uh events as well.
00:33:03.200 --> 00:33:08.400
No, I actually I was thinking about it, I was trying to think of something fun, something insightful to say.
00:33:08.880 --> 00:33:12.720
No, I think our listeners have probably hadn't had had enough of me at this point.
00:33:12.880 --> 00:33:17.759
Um I've certainly had maybe I've had enough of talking about copper for it for a little while.
00:33:18.240 --> 00:33:19.920
You've had enough of yourself, is what you're saying.
00:33:20.079 --> 00:33:20.960
Yeah, yeah, exactly.
00:33:21.039 --> 00:33:24.640
I'm glad I'm going on holiday next week and not having to think about copper so much.
00:33:24.880 --> 00:33:28.640
Um look, I mean, keep an eye out for Cesco Shanghai.
00:33:29.039 --> 00:33:34.000
It's it's gonna be a really big meeting.
00:33:34.240 --> 00:33:36.079
Expect the unexpected.
00:33:36.400 --> 00:33:39.359
It's you know, the price could be doing anything.
00:33:39.599 --> 00:33:43.519
The um, you know, we just we really don't know.
00:33:43.599 --> 00:33:48.480
I I've never, you know, uh what's what's good is it's I don't know and no one knows.
00:33:48.640 --> 00:33:57.839
Um sometimes you feel other people have really good clarity on things and and you're sort of struggling to agree with them or struggling to make your views.
00:33:58.160 --> 00:34:09.119
But it's there is one man sat in the White House who will impact everything about cathode premiums, everything about price action.
00:34:09.360 --> 00:34:14.320
And that back feed that that then feeds into smell smelter profitability.
00:34:14.480 --> 00:34:16.159
We're in a very different situation with that.
00:34:16.239 --> 00:34:19.519
I think that's maybe that that connection is something I'd like to restate.
00:34:19.760 --> 00:34:37.840
Is that last year it made sense for some of these smelters to agree pretty aggressive TCs because they knew they were selling premiums for really high level, and it made sense for for traders to make deals that involved cathode buybacks and and all sorts of things to facilitate the move of material to the US.
00:34:38.079 --> 00:34:42.000
Now, we don't know what will happen come January 1st.
00:34:42.159 --> 00:34:51.599
So I would argue, firstly, there will be, in theory, less positioning from traders to to make that arbitrage trade because they just don't know what the situation was will look like.
00:34:51.760 --> 00:34:54.480
There is more of a risk that the tariff comes in.
00:34:54.639 --> 00:34:56.639
Maybe that's the difference between this year and last year.
00:34:56.800 --> 00:35:06.800
No one thought a tariff was coming in 2026, but they thought it might be coming in 2027, or that if it did come in 26, it would be late enough, you'd be able to play it, you just want the units to play around with it.
00:35:06.960 --> 00:35:14.079
If you're a trader going into annual discussions for cathode, you don't know if you're going to be able to make any money off those trades at the moment.
00:35:14.239 --> 00:35:23.039
Some of them, some of them will be positioning more aggressively than others, and maybe listening to this thinking you're you're wrong, and and you know, we've we've gone long and gone hard.
00:35:24.000 --> 00:35:29.119
But you know, that uncertainty will will feed back into the TC situation.
00:35:30.079 --> 00:35:32.719
So it's uncertainty built on uncertainty.
00:35:33.039 --> 00:35:34.559
These are not different factors.
00:35:34.880 --> 00:35:39.760
You know, the the the cathode market and the conks market are quite different at the moment.
00:35:39.920 --> 00:35:44.639
The conks market is unbelievably tight and the cathode market is pretty loose.
00:35:45.519 --> 00:35:48.800
But in this specific area, the factors feed into each other.
00:35:49.039 --> 00:35:53.199
If a tariff comes in, you know, maybe I'll leave leave with a hypothetical situation.
00:35:53.840 --> 00:36:15.119
If the US government announces in November a 15% tariff starting January 1st and rising to 30% in January 1st, 2028, A, a lot of traders will be able to get material into the US before January 1st, 2027 because six weeks is enough to get stuff from Europe, it's enough to get stuff from some parts of the world into the US.
00:36:16.320 --> 00:36:18.960
So, firstly, you'll see a big flow of material into the US.
00:36:19.599 --> 00:36:32.960
You will also see elevated prices because every trader will want to get as much material as possible that is CME registered into the US across 2027 to play that forward curve.
00:36:34.480 --> 00:36:39.199
That will then help the smelters because the smelters is cathode will be worth so much more.
00:36:39.280 --> 00:36:50.800
And some of these traders, your all of the big traders, Traffee, Glencore, Vittol, Mercuria, Gumva, have books of cathode and concentrates and then can leverage those things to complement each other.
00:36:51.360 --> 00:37:06.480
So if the tariff comes in, that that situation, you know, it will help the smelters because their cathode will be worth a lot more, and you know, it will push up the prices, which could could help certainly Chinese smelters as well because of the free metal they get.
00:37:06.800 --> 00:37:10.880
So um maybe that's the hypothetical situation I want to paint.
00:37:11.039 --> 00:37:16.800
And in that situation, European European premiums go crazy, the copper price goes crazy.
00:37:17.039 --> 00:37:22.159
Um so and then inversely you have the exact opposite happening for a number of those factors.
00:37:22.239 --> 00:37:26.000
So it's it's really unsure, but maybe just imagine what that situation looks like.
00:37:26.079 --> 00:37:36.960
Um and and have a nice rest over the weekend and try and uh not think about metal, maybe not drink so much as you were doing this week if you were in London.
00:37:37.119 --> 00:37:41.840
And um yeah, yeah, look forward to our episode in three weeks' time.
00:37:42.079 --> 00:37:52.000
Uh, if we can if we can record it without with with with ch in China, I don't know if Riverside is is uh beyond the the great firewall, but we'll we'll know soon enough.
00:37:52.480 --> 00:37:57.840
We'll work it out, and and you're gonna you're gonna shed a load more clarity um on things.
00:37:57.920 --> 00:38:00.159
But no, I think um your takeaways are right.
00:38:00.400 --> 00:38:02.320
Uncertainty built on uncertainty.
00:38:02.480 --> 00:38:08.960
It seems to be that uh everything sits on a penstroke or a tweet or a truth um from one mind.
00:38:09.039 --> 00:38:13.119
So with that crazy closing comment, I think let's draw us to a close, Abbott.
00:38:13.280 --> 00:38:17.679
Thanks again for all your comments, your thoughts, your meetings in time with everyone this week.
00:38:17.760 --> 00:38:21.679
Uh it's really helpful and insightful despite not being able to give us uh much much clarity.
00:38:21.760 --> 00:38:24.159
But um that that could and should come over time.
00:38:24.239 --> 00:38:29.199
But um, thanks again to everyone tuning in, listening to Benchmarks Copper Weekly, and uh have a good weekend.
00:38:29.360 --> 00:38:30.239
Thanks everyone.
00:38:30.639 --> 00:38:35.039
If you found the show useful, follow us on Spotify so you don't miss next week's episode.
00:38:35.199 --> 00:38:42.079
For deeper analysis and data on copper supply, demand and prices, visit benchmarkminerals.com forward slash copper.
00:38:42.400 --> 00:38:46.559
Thanks for listening and join us next week as we break down the latest moves in the copper market.
00:38:47.039 --> 00:38:48.079
Bye for now.
