According to the CRU Group consultant, recent agreements by Freeport McMoRan Copper & Gold to pay higher processing fees have paved the way for higher benchmark prices next year by eroding the bargaining power of other global miners. Freeport agreed to 12.4% increase in the fees it pays smelters to process its ore. A source said that it agreed on a charge of USD 63.50 per tonne and 6.35 US cents a pound as its treatment and refining charges for 2012 for standard, clean concentrates with Pan Pacific Copper, Japan's biggest copper smelter. This comes on the heels of a deal on the same terms to China's top copper smelter, Jiangxi Copper in November. Mr Christine Meilton consultant said that "Most of the smelters are now prepared to accept it as the benchmark although there is some reluctance on the part of the Chilean miners who were hoping to secure lower terms. TC and RCs are paid by miners to smelters for converting concentrate into refined metal and are deducted from concentrate sale prices based on London Metal Exchange copper prices MCU3 MCU0.� Mr Meilton said that "Once terms start to be agreed, even if there are specific issues as at present, then it becomes more difficult for other players to negotiate terms significantly different. The Chilean miners may have a case, but I think that they will have a hard task to agree terms very different." The fees suggest smelters are betting that mine supply will increase next year. Charges typically rise when supplies are higher. The increase has taken some in the market by surprise, given a strike related shutdown at Freeport's giant Grasberg copper mine which is well into its third month and forecasts for a deficit in the global market for refined copper next year.

Source