China is seeking copper supply commitments as part of its antitrust review of the megamerger between Anglo American (LSE:AAL) and Teck Resources (TSX:TECK.A/TECK.B), according to Reuters.
People familiar with the process told Reuters that China’s State Administration for Market Regulation (SAMR) has sought assurances over a steady supply of copper concentrate, including volumes sold through traders.
The proposed merger would create a US$54 billion ($77.6 billion) mining giant with control of around 5% of global copper supply.
Much of Anglo and Teck’s copper production from mines in Chile and Peru is currently sold as unrefined concentrates to international buyers. A major consumer of those products, China holds significant leverage over the deal through its antitrust review process.
As Reuters points out, Beijing has historically imposed so-called ‘behavioural remedies’ on major international transactions to protect domestic supply and competition.
China faces concentrate shortage
The regulatory demands come as China’s massive copper smelting industry faces one of its most severe feedstock shortages in decades.
China accounts for up to 60% of global copper cathodes production, but its smelters are increasingly competing for limited supplies of copper concentrate.
Analysts cited by Reuters expect Chinese refined copper output to grow at its slowest pace since at least 2000 this year as the shortage of raw material constrains smelters.
Some analysts also warn that directing Anglo and Teck’s copper concentrates towards China could reduce volumes available on the open market, potentially increasing pressure on Western processing facilities already facing higher costs.
Mandated destination clauses could also accelerate a shift away from traditional annual benchmark pricing towards index-linked spot pricing, they say.
An Anglo spokesperson told Reuters the company is making “good progress towards completion and are working constructively with the Chinese regulator”.
Teck, however, declined to comment on the regulatory process.
So far, the merger has received regulatory approvals in all relevant jurisdictions apart from China.
Glencore adds another complication
Another potential complication is Glencore (LSE:GLEN), which is in talks with Anglo over integrating parts of their Collahuasi copper operation in Chile with Teck’s nearby Quebrada Blanca complex.
Anglo and Glencore each own 44% of Collahuasi, one of the world’s largest copper mines.
Any integration would require the parties to determine the relative value of the assets and how the resulting economic benefits would be divided.
Glencore “understands there is some real economic value to go after and is likely to play hardball”, a major Anglo investor previously told the Financial Times earlier this year.
Anglo and Teck have said they expect their merger to close by March 2027, within 18 months of their initial announcement.
Write to Jackson Chen at Mining.com.au
Main Image: Anglo American
