Copper Treatment Charges Likely To Rise 29% In 2011 -GS
November 29 2010 - 11:00PM
Dow Jones News
Contract negotiations between global mining companies and
Japanese copper producers over copper treatment and refining
charges for 2011 are likely to see the fees rise 29% from 2010
levels, Goldman Sachs said in a report dated Monday.
The charges, known as TC/RCs, are likely to rise to $60 a metric
ton and 6 cents a pound with smelters in a stronger bargaining
position than last year, as spot treatment and refining charges
have risen to $80/ton and 8 cents/lb in China, the bank said.
TC/RCs are paid by miners to smelters to turn copper concentrate
into copper cathode. They are the key source of revenue for
smelters, and tend to fall when concentrate availability is scarce
and smelters are forced to offer competitive fees to attract
limited business.
Conversely, TC/RCs tend to rise when copper concentrate supply
exceeds available smelting capacity.
The rise in spot TC/RCs in China has been widely attributed to
the temporary closure of some smelters in the country for
maintenance.
A conservative attitude to production by Japanese smelters could
also support contract TC/RCs, with Japan's copper cathode output
stagnating in recent years due to what the smelters regard as
unprofitable TC/RC levels.
Nikkei reported that the largest four Japan copper producers
plan to turn out a combined 673,920 tons of the red metal from
October 2010-March 2011, 10.1% below their combined capacity.
However, despite its forecast of a jump in 2011 TC/RCs, Goldman
Sachs said that the copper concentrate market was likely to remain
in a "notional" deficit in 2011, due to, "impressive growth in
Chinese smelting capacity, coupled with sluggish growth in global
concentrate supply."
The annual contract negotiations are conducted by the biggest
copper mining companies, including Freeport McMoran Copper &
Gold Inc. (FCX) and BHP Billiton (BHP.AU), and Japanese smelter
operators including Pan Pacific Copper Co., Sumitomo Metal Mining
Co. (5713.TO) and Mitsubishi Materials Corp (5711.TO).
-By James Campbell, Dow Jones Newswires, +656415-4082;
james.campbell@dowjones.com