Hard Negotiation Expected between Japan Smelters and Copper Ore Suppliers

Year-end price negotiation for copper concentrate shipped during 2008-2009 may take longer time between Japanese copper smelters and overseas copper ore suppliers which will start in London on 9 October along with London Metal Exchange’s yearly meeting. The ore suppliers seem to offer lower treatment charge (TC) and refining charge (RC) to Japanese smelters when world copper ore supply is tightening. On the other hand, Japanese smelters aim better price conditions than TC of US$ 50-55 per tonne and RC of US 55.5 cents per pound agreed in mid-year negotiation for July 2007- June 2008 shipment.Japanese smelters will start the negotiation first with BHP Billiton and Freeport-McMoRan Copper & Gold (FCX). World copper ore supply is much tightening due to output reduction by FCX’s Grasberg mine in Indonesia. Under the current conditions, TC might be set at US$ 40-50 per tonne and RC at US 4 cents per pound. Japanese copper smelters recognize this year-end price negotiation would be even severer for themselves even though they approved TC of US$ 50-55 and RC of US 5-5.5 cents at mid-year negotiation in 2007 both of which were reduced by 8-16% compared with the previous year-end negotiation.Japanese copper concentrate import is approximately 1.3 million tonnes of copper. Price terms agreed in mid-year negotiation are applied to 10% of the total import volume, while price conditions decided in year-end negotiation refer to 60% of the total import volume. Japanese smelters’ profitability is impacted more by price terms agreed in the year-end negotiation.