Japan Copper Smelters Keep Margin at Recent Ore Buy Talk

Japanese copper smelters agreed with BHP Billiton, which operates Escondida mine of Chile, for just less than US$ 45 per tonne of treatment charge and 4.5 US cents per pound at the mid-year negotiation for shipment from July 2008 to June 2009. The selling market condition could be turning point for smelters after severe period in past 2 years when the smelters can get almost same margin as shipment for 2008-2009. BHP Billiton offered US$ 35 per tonne of treatment charge and 3.5 US cents per pound of refining charge at recent negotiation. However, Japanese smelters reject to accept the loss making condition and succeeded to keep the margin. BHP Billiton apparently compromised due to easier supply for copper ore. Japanese smelters try to improve the purchase condition for the end-year negotiation, which represents 80% of procurement volume for the smelters after the smelters succeeded to stop the miners’ aggressive price hike for the ore. The smelters were forced to reduce the margin to around half of the peak in past 2-3 years. The smelters now get 11-12 US cents per pound for treatment and refining while the cash cost is around 15-17 US cents. Japanese smelters enjoyed US$ 112.5 per tonne of treatment charge and 11.25 US cents per pound 3 years ago, which was record margin for smelters. However, the margin kept decreasing along with termination of price participation system, which provided certain gain for smelters depending on copper ingot market price.