Bloomberg reported that processing fees to turn copper ore into metal will likely be sustained at high levels next year after an earthquake in Japan shut smelting capacity and China imported less of the raw material.
Mr Masanori Okada CEO of JX Nippon Mining & Metals Corporation said that “The current level may remain to the end of this year when mining companies including BHP Billiton Limited and Freeport McMoRan Copper & Gold Inc begin annual talks for the fees with major smelters for next year.
Increasing charges paid by mining companies will boost revenue for smelters such as Pan Pacific and Sumitomo Metal Mining Company used to make pipes and wires. The March 11 earthquake and tsunami halted operations at smelters and refineries including Mitsubishi Materials Corporation.
Mr Michael Widmer head of metals research at Bank of America Merrill Lynch in London said that processing rates have risen somewhat in the H1 of 2011 which was heavily influenced by smelter outages in Japan, increasing spot offers. He was the second most accurate forecaster for the metal for the eight consecutive quarters ended March 31.
Mr Widmer said that since then, spot treatment and refining charges have fallen again. We believe that the concentrates market is structurally not oversupplied so see only limited upside to contract TC and RCs in 2012.
Aurubis AG said that smelters of the metal are well supplied into the third quarter and are mostly accepting treatment charges only above USD 100 per tonne and refining charges above 10 cents per pound.
Treatment fees are expressed in dollars per ton of concentrate received and refining fees in cents per pound of copper in the ore. The fees are deducted from the price paid by smelters to mining companies for the raw material.
The International Copper Study Group said recently that copper supply outpaced demand by 18,000 tonnes in March compared with 1,000 tonne deficit in February. Demand will exceed supply by 279,000 tonnes in 2012 narrowing from a deficit of 377,000 tonnes in 2011.
Mr Takashi Murata analyst of Daiwa Securities Capital Markets Company said that some smelters and mining companies were said to have set annual contracts at USD 85 per tonne and 8.5 cents a pound starting July 1. Processors in Japan cover 10% to 20% of their annual volumes in the mid year contracts.
Pan Pacific said recently that it agreed with BHP to USD 90 per tonne and 9 cents a pound for the period from July to December up from USD 70 and 7 cents in the H1. In January, the company set annual fees for the contract ending on December 31 at USD 56 and 5.6 cents with Freeport. That compared with USD 39 and 3.9 cents for those starting July 1st 2010.
