Sumitomo Metal Mining Approves Lower TC/RC Offered by FCX

Sumitomo Metal Mining and Freeport-McMoran Copper & Gold (FCX) recently agreed to set treatment charge (TC) at US$ 46.5 per tonne and refining charge (RC) at 4.65 US cents per pound for 2010-2011 copper ore shipment. TC/RC totals approximately 12 US cents per pound, lower by 38 US cents from 2009-2010 shipment and by 7% from July 2009-June 2010 shipment.

Copper smelters pay ore charge to offshore ore suppliers, which is calculated by copper price at London Metal Exchange minus TC/RC. Smelters gain TC/RC as their incomes.

The benchmark was initially estimated at approximately 13 US cents per pound, which was a result of mid-2009 price negotiation involving TC at US$ 50 per tonne and RC at 5 US cents per pound. Japanese copper smelters’ productive cost is recently supposed at 30 US cents per pound, according to a concerned source. TC/RC has stayed lower than copper smelters’ costs but the figures will become even worse for 2010-2011 shipment.

The latest TC/RC is the secondly lowest since those for 2008-2009 shipment. FCX’s offer was strong to reflect supply tightness of ore concentrate due to productive troubles in copper mines.

Pan Pacific Copper (PPC), Japanese largest copper smelter, has also finished TC/RC negotiation with FCX though PPC hasn’t revealed the detailed terms. Both Sumitomo Metal Mining and PPC haven’t finished TC/RC negotiations with BHP Billiton who operates the world largest copper mine, Escondida of Chile.