Chinese smelters, the world’s biggest buyers of mined copper, are expressing concerns over the potential merger between mining giants BHP Group and Anglo American. The proposed takeover would give BHP control of roughly 10% of global mined copper supplies, surpassing Chile’s Codelco and Freeport-McMoRan as the largest producer.
Zhang Weixin, a metal analyst at China Futures, stated that this development “is not good news for China given the heavy reliance on external supply, and Chinese companies hold limited resources.” China’s State Administration for Market Regulation has not yet responded to requests for comment on the matter.
The China Smelters Purchase Team (CSPT), a group of top smelters that negotiates with miners on yearly prices to treat and refine copper, has no current plans to urge Beijing to investigate the deal, according to three sources familiar with the matter.
Chinese smelters are concerned that the merger would give BHP more power to negotiate prices, as the company is known to be more active in the spot market, where it sells to domestic smelters using tenders. In contrast, rival miners Freeport and Antofagasta agree on an annual fixed sale price with China’s smelters, which is widely used as an industry benchmark.
Smelter officials, who wished to remain anonymous, said the prospect of more supply being sold under index pricing could increase uncertainty for costs and planning. They also noted that smelters are still recovering from supply shortages driven by the closure of the First Quantum’s Cobre Panama mine, which drove down treatment charges (TCs) – their main source of income.
While consolidation raises concerns, some experts believe it could calm the market longer term by tackling the high cost and risk of developing mines. William Adams, head of base metals research at Fastmarkets in London, said the current tightness in spot treatment and refining charges highlights the need for more investment upstream.