(MERAF) for the Base Metals Smelting Sector - CCME

2.8.4. Pricing of base metals
Before reading this section, it should be noted that smelters have relatively little
exposure to metal price. Mines assume most of the price risk, and mine
revenues are cyclical as a result. The main purpose of the discussion below is to
indicate that the Base Metals Smelters operate in a price-taker environment.
2.8.4.1. Cobalt
During much of its history, the price of cobalt 60 was set primarily by producers.
Before World War II, Belgian, British, Canadian, Finnish and French producers
agreed to control cobalt supply and to maintain a uniform price. After WW II,
prices quoted by the Belgian Congo were generally followed by other producers.
Beginning in the mid-1980’s, Zaire and Zambia cooperated in setting the
producer price. In the early 1990’s, the African producers lost much of their
influence on cobalt prices. The producer price was renamed the reference price
in 1994, and since then, most cobalt has been sold at free market prices.
Because cobalt is considered to be a critical and strategic metal, purchases for
and sales from Government stockpiles have added to supply and demand and
have influenced cobalt prices.
2.8.4.2. Copper
Historically, wirebar was the dominant form of copper traded and the price for
refined copper wirebar was the “bellwether” price for copper 61 . By the middle
1970’s, technology had changed to continuous casting making the high-grade
copper cathode price the base price for most transaction.
Copper products from each stage of processing have their own independent
markets and are traded globally. Each product has its own pricing procedure that
is linked, for the most part, to its copper content and the market price for refined
copper. Copper concentrates are purchased on the basis of the refined copper
market value of their recoverable content, with charges taken for smelting and
refining. Penalties may be assessed by the smelter/refiner for unwanted
contaminants and credits may be given for recoverable byproducts. Similarly,
prices for copper scrap are discounted from the refined value of the recoverable
copper content to allow for processing costs and profit. Market conditions for
each type of scrap will affect their prices.
Until the late 1970’s, US copper prices were generally referenced to the producer
price. As a result of the nationalization of production in Africa and Chile, the US’
influence on world market weakened. As a result, pricing changed to a COMEX-
60 US Geological Survey, Minerals Information, Metal Prices in the United States through 1998.
URL: minerals.usgs.gov/minerals/pubs/metal_prices
61 US Geological Survey, Minerals Information Metal Prices in the United States through 1998.
URL: minerals.usgs.gov/minerals/pubs/metal_prices
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