Smelters process Chilean concentrate for free

The mid-year negotiations between Antofagasta (AMSA) and Chinese smelters have concluded with a historic settlement of $0/0¢. While unprecedented, the outcome is not surprising, as it lands slightly above the midpoint of the believed negotiating range, from -$15/-1.5¢ proposed by Antofagasta +$10/1.0¢ from the Chinese smelters. Moreover, this result aligns with market participants’ rumours circulating prior to the agreement. Separately, rumours suggest Q3 contract negotiations between one top miner and Chinese smelters concluded at levels ranging from -$25/-2.5¢ to (+)$5/0.5¢.

As is to be expected in long-term negotiations, the agreed price remained firmly above the first half average of spot terms, although stands out this time is the absolute difference of $24/2.4¢ units, which far exceeds the $17/1.7¢ unit deviation observed in 2021. Although this does not imply a perfect correlation between the first-half average spot terms and the mid-year benchmark, it does suggest that smelters could have faced a more challenging scenario, potentially even forcing them to accept negative terms under tighter market conditions.