Japan Copper Smelters Agree Less Charge in Mid-year Negotiation with Miners

Japanese copper smelters and offshore ore suppliers reached agreement in mid-year price negotiation for copper concentrate shipped in July 2006-June 2007, along which Japanese smelters decrease treatment charge (TC) and refining charge (RC) by about 37% from the previous negotiation for shipment in 2006-2007. Price participation system was maintained, of which BHP Billiton had insisted on abolishment, while 18 US cents cap was imposed on Japanese smelters’ profit gain and the standard copper price for PP system was raised to 120 US cents from previous 90 US cents. Japanese copper smelters achieved minimum price targets in the mid-year negotiation, while they were forced much concession before the strong stance of ore suppliers.Japanese copper smelters, including Pan Pacific Copper, for which Nippon Mining & Metals and Mitsui Mining & Smelting invest, and Sumitomo Metal Mining, agreed with Escondida of Chile to set TC at US$ 60 per tonne and RC at 6 US cents per pound for copper concentrate shipment in a year to June 2007. The sum of TC and RC became to 15.4 US cents per pound. Japanese smelters and offshore miners other than Escondida agreed on US$ 95 of TC and 9.5 US cents of RC in the previous year-end price negotiation, the sum of which was 24.3 US cents.Japanese smelters already concluded mid-year negotiation with Highland Valley of Canada, while the results are not disclosed. The smelters are in negotiation with Ok Tedi of Papua New Guinea and Batu Hijau of Indonesia, which seems to conclude soon regarding the Escondida price as the benchmark.Japanese copper smelters pay the difference between TC/RC and 3-month averaged copper price after the ore arrival as ore charge to offshore miners. The sum of TC/RC was decreased by about 37% in the mid-year negotiation from the previous year-end negotiation.On the other hand, the smelters could prevent the end of PP system, along which the smelters and the miners distribute profits gained from the surge of copper price. The smelters take 10% and the ore suppliers the rest of the profits. BHP Billiton had insisted on abolishment of the system and Japanese smelters were strongly opposed.Japanese smelter source showed dissatisfaction with the results of the mid-year negotiation despite of the continuance of PP system. The smelters were forced much concession before the next year-end negotiation for shipment in 2007-2008 and with no large ore supplier other than Escondida.