UPDATE 3-M'bishi Materials wins 70 pct hike in '09 copper talks
Tue Jan 6, 2009 4:51am EST
reuters.com
(Adds details in paragraph 18)
By Miho Yoshikawa
TOKYO, Jan 6 (Reuters) - Mitsubishi Materials Corp (5711.T) said it had won a roughly 70 percent hike in copper processing fees from Freeport-McMoran Copper & Gold (FCX.N), in what is believed to be the first fee rise won by a Japanese copper smelter for 2009.
Japan's copper smelters have been pressing for hikes as raw material supply is likely to surpass demand, and Mitsubishi Materials said it is aiming for even bigger rises from other major miners such as BHP Billiton Ltd/Plc (BHP.AX)(BLT.L) as conditions have deteriorated since the Freeport agreement.
A company official declined to provide exact prices in the agreement with Freeport which was reached late last year, but said they were close to prices quoted in industry reports.
Reports have said 2009 processing fees between Mitsubishi Materials and Freeport were set at $75 a tonne and 7.5 cents a pound, compared to estimates of $45 and 4.5 cents for 2008.
"I can only say that they are close to levels that are being talked about in the industry," the official said.
It was the first agreement Mitsubishi Materials has reached with a miner for a 2009 contract on treatment and refining charges (tc/rc) -- the fees to turn copper's raw material to metal.
Pan Pacific Copper Co Ltd, Japan's top copper smelter, and Sumitomo Metal Mining Co Ltd (5713.T), the second largest, said on Monday that they had yet to reach an agreement on copper fees, a major source of revenues for smelters, for 2009.
The hike comes against a backdrop of plunging global demand for the industrial metal used extensively in the power and construction industries, which combined with growing inventories pushed down copper prices by more than 50 percent in 2008.
"Demand for copper both at home and overseas has plummeted, and this has led to a surplus in concentrate," the Mitsubishi Materials official said.
He said he had mixed feelings about the fee hike as it stemmed from falling demand.
"A healthy improvement in the tc/rc is one which is accompanied by a rise in copper production," he said.
The collapse in demand has forced Japan's two top copper smelters to curb output, with Pan Pacific cutting output by 5 percent in the six months to March compared to its initial output plan, while Sumitomo Metal plans a 7 percent reduction.
Talks with other major miners are due to begin later this month.
"The business environment has deteriorated since the agreement with Freeport, and we would like to see this reflected in future contracts," the official said.
An industry source said, however, that the first processing fees agreed between a smelter and a miner typically become the benchmark for term contracts for that period, and that this year was unlikely to prove to be an exception.
Copper fees have either fallen or remained unchanged since mid-year fees for the 2005/06 period due to tight concentrate supplies, which increased competition over raw materials among smelters.
Smelters typically have two types of annual copper contracts with global miners, one that begins in January which usually covers a larger volume. A second contract covers the July-June period.
In mid-December smelters in China, the world's top copper consumer, were reportedly asking for charges of $82-$83 and 8.2-8.3 cents with price participation for 2009 term contracts. (Editing by Edwina Gibbs and Clarence Fernandez) |
