LMEWEEK-Atlantic Copper aims for record cathode production

* Expects copper concentrate market to be balanced

* Says new smelting capacity to absorb increase in supply

* Says scrap copper market remains tight

By Harpreet Bhal

LONDON, Oct 23 (Reuters) - Spanish smelter Atlantic Copper aims for record production this year and expects increased capacity at copper smelters globally to absorb the output from mines and keep the concentrates market in balance through 2017.

Atlantic Copper, a subsidiary of mining firm Freeport-McMoRan Inc, expects to produce 284,000 tonnes of copper cathodes, up from 226,000 tonnes in 2013, when it cut production by 17.5 percent due partly to a maintenance shutdown at its facility in Huelva, Spain.

Javier Targhetta, president of Atlantic Copper and senior vice president for marketing and sales at Freeport, said that an increase in mined copper output was not expected to result in a glut of raw material.

"While there are new mines coming on stream, there is also new smelter capacity being built in China," Targhetta told Reuters in an interview.

"There are a large number of medium-sized smelters coming on stream there through to 2018, which will amount to around 1.5 million tonnes of copper (production) capacity."

China is the world's biggest copper consumer and producer, and several large copper smelters are expected to start up over the course of this year and next.

Supply from mines is expected to increase over the next two years, particularly from Indonesia where Freeport's Grasberg mine and Newmont Mining's Batu Hijau mines recently resumed exports of concentrates following a nine-month hiatus.

Analysts polled by Reuters this month forecast a surplus of 94,300 tonnes in the refined copper market this year, rising to 350,000 tonnes in 2015, as they expected demand to lag behind rising refined supplies.

Targhetta, however, said he was confident that demand for refined copper will remain stable in China, and he saw increased appetite from Turkey, Egypt and Saudi Arabia as well.

"We ... may not be able to match it (the increased appetite in Turkey, Egypt and Saudi Arabia)," Targhetta said.

"We fully sold our Indonesian production since we started full production in early August. In just 15 or 20 days after the mine started we had sold it all," he added.

TIGHT SCRAP MARKETS

Targhetta said supplies of scrap copper were tight due to low copper prices and warned that the implications for the market could be severe, given that roughly 35 percent of refined copper demand is met by scrap material.

Almost all smelters use scrap copper along with concentrates in the refining process.

Scrap availability tends to tighten when metals prices fall due to a lack of incentives to recover scrap at lower prices.

"The situation in Europe is quite tight for scrap at the moment. If scrap disappears, it could mean a significant shortfall of copper," Targhetta said.

Benchmark copper closed at $6,630 a tonne on Wednesday, having shed more than 10 percent of its value so far this year.

Smelters are now in the process of negotiations with mining companies over treatment and refining charges for 2015.

Some smelters are expected to command significantly higher charges to process increasing amounts of complex concentrates, which contain a high level of arsenic as a byproduct. Clean material contains no more than 0.2 percent of arsenic.

The complex concentrates have been coming mainly from Codelco's Ministro Hales mine in Chile and Chinalco's Toromocho mine in Peru.

Targhetta said there could be a significant difference in the pricing of "complex" material compared with standard "clean" material.

Not all smelters will be willing to take these complex concentrates, he said.

"If a given smelter is stably sourcing concentrates that have low impurities, that given smelter won't be able to treat much of the complex concentrates. It would rather seek clean concentrate instead." (editing by Jane Baird)