Copper Smelters in China, Japan Secure 10% Increase in Fees

Jiangxi Copper Co., China’s biggest copper smelter, and Japan’s Pan Pacific Copper Co. said mining companies will pay them at least a 10 percent increase in fees to process the metal in 2013, climbing for a third year.
Jiangxi Copper settled fees with Freeport-McMoRan Copper & Gold Inc. (FCX) and another miner it didn’t name at $70 a metric ton and 7 cents per pound, Pan Qifang, secretary of the board for the Guixi, Jiangxi province-based smelter, said today. Pan Pacific agreed with several miners, whose names it didn’t disclose, to increase the charges by 10 percent, said Shigeru Oi, senior executive officer for raw materials.

Enlarge image

Copper cathode sheets stand stacked at the copper mining and smelting complex. Global copper supply will exceed demand by 330,000 tons in 2013, compared with a deficit of 320,000 tons in 2012. Photographer: Oliver Bunic/Bloomberg

Enlarge image

An undated company handout photo shows the electrolytic workshop at Jiangxi Copper's Guixi smelter in Guixi, Jiangxi province, China. Source: Jiangxi Copper via Bloomberg

Mining companies including BHP Billiton Ltd. (BHP) and Freeport have been negotiating with smelters to set the charges for 2013. An increase in the fees, known as treatment and refining charges or TC/RCs, for copper concentrate, or semi-processed ore, boosts smelters’ revenue. World copper supply will outstrip demand in 2013 for the first time in four years as mine output gains, according to Pan Pacific.
“The increase, which reflects market expectation of more ore supply from later this year, will partly offset rising power costs and the stronger yen for Japanese smelters,” Kim Gyung Jung, an analyst at Eugene Investment & Securities Co. in Seoul, said today.
Treatment fees are expressed in dollars per ton of concentrate received and refining fees in cents per pound of copper in the ore. The fees are deducted from the price paid by smelters to mining companies for the raw material.

2012 Fees

Freeport and major smelters in China and Japan set the fees in 2012 at $63.5 a ton and 6.35 cents a pound, while BHP and some Chinese smelters agreed to $60 a ton and 6 cents a pound. Copper for three-month delivery on the London Metal Exchange traded at $7,953 a ton at 12:20 p.m. in Tokyo.
Fiona Martin, a Melbourne-based spokeswoman for BHP, declined to comment. BHP owns Escondida in Chile, the world’s biggest copper mine. A call to Eric Kinneberg, spokesman for Phoenix-based Freeport, wasn’t answered outside of business hours. Freeport operates the Grasberg mine in Indonesia.
Masashi Takahashi, a spokesman at Sumitomo Metal Mining Co. (5713), Japan’s second-biggest copper smelter, and Toshiaki Yamada, a spokesman at Mitsubishi Materials Corp. (5711), Japan’s third-largest producer, declined to comment.
Global copper supply will exceed demand by 330,000 tons in 2013, compared with a deficit of 320,000 tons in 2012, Deutsche Bank said in a report on Jan. 8. Mine-supply growth is expected to increase significantly in 2013, exceeding 8 percent, a rate not witnessed for more than a decade, the bank said.(bloomberg)