Pan Pacific Copper Wins Higher Margin

Japanese largest copper smelter, Pan Pacific Copper agreed with copper mining major, Freeport-McMoRan Copper & Gold of USA to increase copper treatment and refining charges by 13.4% for 2012-13 shipment. The smelter won higher margin for 2 years in a row under the market expectation for loose supply due to uncertainty in world economy. Pan Pacific Copper is still talking with BHP Billiton of Australia.

Pan Pacific Copper agreed with Freeport-McMoRan Copper & Gold to increase the treatment charge to US$ 63.50 per tonne and the refining charge to 6.35 US cents per pound. The total margin is US$ 359 per tonne compared with US$ 317 for 2011-12 shipment, which was settled a year earlier at US$ 56 per tonne of treatment charge and 5.6 US cents per pound of refining charge.

Freeport-McMoRan Copper & Gold already settled the margin with Chinese major smelter, Jiangxi Copper as such level before the agreement with Pan Pacific Copper. The higher smelter margin is due to loosening copper ore supply. However, the miner side sees the supply gets tighter when Freeport-McMoRan Copper & Gold reduces the output at Indonesian Grasberg mine due to strike. The margin improvement was narrower than the smelters’ expectation.

The new margin US$ 359 per tonne is much lower than around US$ 600 of smelters’ production cost. The smelters can get only around 5% of current around US$ 7,900 of copper price. The miners keep gaining most of the value of copper chain.