Japan Smelters Resist BHP Billiton’s Copper Ore Price Policy

Japanese copper smelters are resisting BHP Billiton. BHP Billiton will terminate the price participation system, in which smelters can get 10% of difference from base price when copper price increases more than the base price of 90 US cents per pound, at the mid-year concentrate price negotiation in June for July-June 2007 shipment. The negotiation is expected to hard to conclude with the price participation system issue when the smelters decided to resist the tough stance of BHP Billiton. Copper smelters pay difference between copper ingot price at London Metal Exchange and treatment charge and refining charge to miners as price of copper concentrate. The TC and RC are revenue for smelters. Copper miners also return some of the income to smelters through the price participation system depending on the copper ingot price. The smelters get around 24 US cents per pound of copper when the concentrate purchase condition was US$ 95 per tonne for TC and 9.5 US cents per pound. The price participation system allows smelters getting additional 12.5 US cents per pound, which represents 10% of 125 US cents of difference between base price of 90 US cents and 215 US cents of averaged LME settlement price in January. BHP Billiton tries to get all of gain from higher copper ingot price by terminating the price participation system at the mid-year negotiation. Japanese smelters criticize BHP Billiton ignores the same boat crew relationship between miners and smelters. The smelters decided to resist such move.