China, Japan copper smelters seek higher term TC/RCs

By Polly Yam

HONG KONG, Dec 10 (Reuters) - Chinese and Japanese smelters have raised their requirements for charges to turn imported concentrates into refined copper in 2010 following global miner Xstrata's plan to close smelting capacity, industry sources said on Thursday.

Xstrata said it would close the Kidd metallurgical operations in Canada next May, though the mine and concentrator would continue to operate.

That suggests the mine's concentrates, used to feed Kidd's 125,000 tonnes a year of refined copper production, could be available to other smelters.

Treatment and refining charges (TC/RCs) are fees paid by overseas sellers to Chinese smelters for converting imported concentrates into refined copper, and are deducted from the sale prices, based on London Metal Exchange copper.

Higher TC/RCs arise when supply of concentrate rises or demand falls, which usually cuts the prices of concentrate and could in turn boost refined copper production.

'The closure will certainly benefit smelters,' an industry source said.

In October, Chinese smelter officials said top copper producers were seeking TC/RCs of $50 per tonne and 5 cents per pound, respectively, from foreign miners for concentrate shipments in 2010.

Chinese smelters now are looking to receive TC/RCs of around $60 and 6 cents, which will be still 20 percent lower than this year's $75 and 7.5 cents.

Chinese smelters were worried about a fall in copper prices after prices more than doubled this year, a smelter official said.

'Cash production costs at global smelters, including Chinese smelters, are over TC/RCs of $55 and 5 cents. We are trying not to make losses, or at least we don't make big losses,' he said.

Global miner BHP Billiton has offered TC/RCs of $43 and 4.3 cents to Chinese smelters for 2010. The two sides would hold the second round of the annual talk in the coming week, industry sources said.

Japanese smelters, the world's second-largest copper concentrate buyer after Chinese, have also indicated their term TC/RC requirements around $60 and 6 cents to overseas miners. Last month, Japanese smelters expected the TC/RCs at $50 and 5 cents in 2010.

BHP has offered term TC/RCs of around $40 and 4 cents to Japanese smelters, the industry sources said.

A senior Japanese official directly involved with the term talks said there was still a price gap of about $20 between Japanese buyers and BHP.

'There's still a wide gap in our ideas...and I don't anticipate an agreement when we meet next week,' he said.

(Additional reporting by Miho Yoshikawa in TOKYO)

(Editing by Clarence Fernandez)

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