Japan Mid-Year Copper TC/RC Negotiations Deadlocked -Exec

SINGAPORE, Jun 30, 2010 (Dow Jones Commodities News via Comtex) -- Mid-year negotiations between global mining companies and Japanese copper producers over copper treatment and refining charges are deadlocked, said an executive from a Japanese smelting company involved in the negotiations late Wednesday.

Copper TC/RCs, as they are called, were settled for 2010 at $47 a metric ton and 4.7 cents a pound, levels at which Japanese smelters struggle to make a profit, but a small percentage of copper concentrate offtake is renegotiated mid-year. This usually provides an indication of where the next year's annual fees might settle.

"There has been no progress in the negotiations so far," the executive said.

TC/RCs are paid by miners to smelters in order to turn copper concentrate into copper cathode. They are the key source of revenue for smelters, and tend to fall when concentrate availability is scarce and smelters are forced to offer competitive fees to attract limited business.

A large expansion in smelter capacity in China has kept the concentrate market tight, despite increasing supply from some copper mining nations like Zambia, the executive said.

"Spot TC/RCs in China are being quoted around 10 cents a ton and 1 cent a pound so the miners are pointing at that," he said. "But we cannot go any lower than where the annual fees settled."

China, the world's largest copper consumer, produced 1.9 million tons of copper cathode in the January-May period, up 16% on year, reflecting significant increases in Chinese smelter capacity in 2008 and 2009.

The executive also said that the high season for fertilizer production in China was now over so demand for sulphuric acid, a by-product of the smelting process and a key fertilizer input, had dropped, taking prices with it.

"Generally speaking smelters cannot offset their losses by selling sulphuric acid," he said.