Japan Mid-Term Copper Smelting Fees May Fall; Talks On

Japanese copper smelters are yet to agree on mid-term treatment and refining charges, but hopes of coming close to last year's mid-term prices of around $45 a metric ton and 4.5 cents a pound are looking slim, market watchers said Thursday.

Lower mid-term fees will be a welcome development for miners who are already faced with much lower copper prices of around $5,000/ton, down from a record $8,940/ton last year.

"Talks for copper TC/RCs aren't finished, and we don't disclose any details before they're settled," said a spokesman for Sumitomo Metal Mining Co. (5713.TO), Japan's second-largest copper smelter.

A spokesman for Mitsubishi Materials Corp. (5711.TO), Japan's third-largest smelter, also said there was no settlement yet, and declined to give detail. A spokesman for top producer Pan Pacific Copper Co. couldn't be reached for comment.

Mid-term supply contracts with miners such as BHP Billiton Ltd. (BHP) start from July 1, and talks may continue until late-July.

Spot processing fees this month falling to below $30/ton and 3 cents a pound indicate mid-term charges around last year's levels will prove difficult to achieve.

"Earlier indications pointed to mid-term charges of $45/ton and 4.5c/lb but with spot prices falling, especially so in China, this will put smelters under pressure," said Moira Daw, an analyst at Sydney-based AME consultancy.

"I suspect TC/RCs will come in closer towards the $30/ton level rather than the $45/ton," Daw said.

Falling processing charges indicate a concentrate market in balance or short supply, so smelters have to lower their terms to compete for raw material.

Production cuts at older mines such as a 30% output drop at BHP's majority-owned Escondida mine in Chile have tightened the concentrate market, while strong demand in China is also likely to have played a role, analysts said.

Chinese copper concentrate imports, chiefly sourced from South America, Mongolia and Australia, in May rose 23% on year to 508,902 tons. For the January-May period, imports gained 6.7% to 2.44 million tons.

Separately, German copper smelter Aurubis AG (NDA.XE) said it expected smelter charges to miners to rise, after some spot market deals concluded at less than $30/ton and 3 c/lb.

Delays in Chinese ports in clearing imported copper scrap and the disappearance of the Shanghai Futures Exchange and London Metal Exchange arbitrage have resulted "in a far reaching withdrawal of Chinese buyers from the market, with the result that the situation for European buyers has improved," Aurubis said.

Annual TC/RCs settled at $75/ton and 7.5 a pound in January, and the fees essentially represent a smelter's profit margin on refined metal.

-By Elisabeth Behrmann, Dow Jones Newswires; 61-2-8272-4689 [e-mail]