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REFILE-China's copper processing fees could recover from 2nd quarter, analysts say

(Corrects to read "the" (not "a"), paragraph 8)

By Mai Nguyen and Siyi Liu

HANOI/BEIJING, March 5 (Reuters) - Fees to process copper concentrate in China, which have plummeted to their lowest level in over a decade due to short supply, could recover in the second quarter when maintenance season begins, industry experts said.

The falling charges have threatened to cut output in the world's top producer of refined copper and underpinned the benchmark copper contract on the London Metal Exchange (LME).

Spot copper treatment charges (TCs) in China tumbled to $12.70 per metric ton on Friday, a near 75% drop in just two months and the lowest level since 2013, when commodity price and news specialist Fastmarkets started publishing the weekly index.

TCs - the main source of income for smelters - fall when there is shortage of smelters' raw material copper concentrate and vice versa.

"We expect a combination of smelter maintenance over March-April and lower utilisation rates to provide some temporary relief to the market balance," said Craig Lang, analyst at consultancy CRU Group, on Tuesday.

"This should see terms bottom and stage a partial recovery in Q2," Lang added. This echoed comments from a major copper smelter, which declined to be named.

Chinese smelters have been rapidly expanding their capacity over the past year to get ahead of an expected surge in copper demand from sectors related to the green energy transition such as electric vehicles or wind and solar energy.

But several mine disruptions globally, including the shutdown of the big Cobre mine in Panama owned by First Quantum , have triggered tightness in copper concentrate on the spot market, flipping many analysts' market balance projections to a deficit from a surplus this year.

Some analysts and market participants are hoping to see production at the Cobre mine resume after Panama's general election in May.

Tighter supply of alternative materials such as copper scrap and blister also contributed to the shortage, Lang said.

China's refined copper output climbed 13.5% in 2023 to a record high of nearly 13 million tons. Imports of copper concentrate rose 9.1% to 27.54 million tons in the same year, official Chinese data showed.

State-backed research house Antaike said in a January report that spot TC had sunk below the average manufacturing costs for copper smelters.

China's top smelters proposed output cuts in a meeting in January, but no actual implementation has taken place, sources close to the matter said.

Despite the sharp fall in spot TC, the biggest Chinese smelters get most of their concentrate via long-term contracts signed at the $80-a-ton annual benchmark.

Smaller-scale smelters are more prone to product cuts due to their reliance on spot supply, Lang said. (Reporting by Mai Nguyen in Hanoi and Siyi Liu in Beijing; editing by Milla Nissi)