Japan Smelters in Tough Copper Price Talk with Miners

Japanese copper smelters started second round ore purchase negotiation with offshore miners for shipment between July 2006 and June 2007 in the week in Tokyo. BHP Billiton, which is owner of Escondida mine of Chile, offered US$ 80 per tonne of treatment charge and 8 US cents per pound of refining charge with no price participation system while Japanese smelters sought price participation. The negotiation could fail to make concession with wide gap and the negotiation is expected to postpone until September. Japanese smelters including Pan Pacific Copper, in which Nippon Mining & Metals and Mitsui Mining & Smelting have interests, Sumitomo Metal Mining, Mitsubishi Materials and Dowa Mining plan to purchase more than 400,000 tonnes of concentrate from offshore miners through the mid-year negotiation. Japanese smelters plan to purchase the largest volume of around 180,000 tonnes from Escondida mine. The ore purchase price depends on averaged copper ingot cash price at London Metal Exchange in 3 months after concentrate arrives in Japan. The price participation system allows smelters to add 10% of price gap between base copper ingot price of 90 US cents per pound and the averaged price on treatment charge and refining charge, which are revenue for smelters, if the average price is higher than base price. If the averaged price is lower than base price, 10% of the price gap was withdrawn from the treatment and refining charges. BHP Billiton seeks termination of price participation system in the mid-year negotiation. The miners and smelters offered conditions the week for the first time after they failed to offer the conditions at the first round negotiation in Netherlands in late June. However, BHP Billiton offered US$ 80 per tonne of treatment charge and 8 US cents per pound of refining charge without price participation for the mid-year negotiation, which is much lower than the offer in the end of 2005 at US$ 95 of treatment charge and 9.5 US cents of refining charge with price participation for 2006-2007 shipment. Japanese smelters offered US$ 80 per tonne of treatment charge and 8 US cents per pound of refining charge with price participation under tight copper ore supply. The wide gap between miners and smelters could take the negotiation longer time to reach agreement. They might postpone the negotiation until September.