SHANGHAI, Nov. 11 -- Jiangxi Copper Co. (0358.HK), China's largest copper smelter by output, expects copper treatment and refining charges to drop next year on tight concentrate supply, but is still seeking 2010 treatment charges above $50/ton, a person familiar with negotiations said Tuesday.
Jiangxi Copper is currently holding preliminary discussions with global miners BHP Billiton (BHP) and Freeport-McMoRan Copper & Gold Inc. (FCX) on 2010 TC/RCs, the person said.
The two miners had offered treatment charges of $75/ton and refining charges of 7.5 cents a pound for 2009 but a series of mine closures amid accidents and labour disputes has reduced concentrate supply to a level where market participants are now talking about the likelihood of TC/RCs falling below $45/ton and 4.5 cents/lb in 2010.
A treatment charge of "$75/ton is not possible in 2010," the person said.
TC/RCs represent the profit margin of copper smelters and in times of tight concentrate supply, smelters are forced to lower these charges to ensure sufficient availability of the raw material to keep their smelters running.
Spot market TCs are now around $20/ton and RCs around 2.0 cents/lb, after recent strikes at Chilean copper mine Spence and an mechanical fault at BHP Billiton's Olympic Dam copper-gold mine in Australia reduced the supply of concentrate in the market.
Some industry participants expect 2010 TC/RCs to be settled around $50 a metric ton and 5.0 cents/lb, 33% lower than 2009 fees, and Jiangxi Copper "would certainly like to see 2010 TCs settled higher than $50 a ton," said the person, who has direct knowledge of the talks.
But with the steady increase in Chinese smelting capacity in response to a rally in global commodities prices, "it makes sense for copper concentrate sellers to ask for lower TC/RCs," said Che Hongyun, a senior analyst with China Galaxy Securities Co.
(Source: Dow Jones)