UPDATE 2-Codelco ups China copper premiums to $85/T -buyers

* China sees premiums up 13 pct after 32 pct cut this year

* Chinese premium up $10, top of expected $5-10 range

* Several Chinese buyers baulk at new premium

* New premium leaves China paying more than Europe, Japan

By Polly Yam

HONG KONG, Nov 16 (Reuters) - China, which has been the engine of world copper prices in 2009, will be saddled next year with a bigger premium on shipments from the world's top supplier, Codelco, than rival buyers in Asia and Europe.

Chile's Codelco [CODEL.UL] has raised term premiums for refined copper for delivery to China in 2010 by $10 per tonne to $85 per tonne over London Metal Exchange prices MCU0, three buyer sources said on Monday. It has also raised premiums for shipments to South Korea and Japan for next year by $10.

While Chinese buyers pay an $85 premium, Codelco will charge a $75 premium on shipments to the Japanese port of Yokohama, $74 for South Korean buyers and an $80 premium -- unchanged from this year -- payable by customers in Europe. [ID:nT230071]

Chinese buyers had expected the Chilean producer to raise 2010 premiums by $5-$10 a tonne after a 32 percent fall this year and several said Codelco's decision to shoot for the top end of that range might prompt them to find alternative suppliers.

"With $85 premiums, it looks like we won't be signing with Codelco for next year," a purchasing manager at one large end-user of copper said. He added that the firm would look for other, cheaper sources for next year's term deliveries.

"Codelco has offered $85 this morning. This is a bit high," said a manager at a large trading firm in China. His firm may skip shipments for the first quarter and would book shipments for the second quarter to the fourth quarter of next year because of the high premium and because of high stocks currently in China, he said.

Western analysts had been looking for premiums closer to the levels settled with Japanese and South Korean buyers.

"A premium of $85 sounds like a tough sell. But what is another $10 given the price of copper? We had heard $70 to $75 and I wonder if this number is a result of China talking it up as they are sitting on their own stocks," a trader in Singapore said.

"SELLER'S MARKET"

Chinese buyers had expected a rise in 2010 copper premiums, given that Codelco has received stronger premiums for additional bookings due to China's record imports in the first half of 2009, with demand expected to stay robust next year.

Chinese buyers have paid higher term premiums to Codelco than those in Japan and South Korea for years.

Chilean sales of refined copper to China have more than doubled this year, totalling 1.134 million tonnes in January-September, although China's total imports have grown even more quickly, rising 165 percent to 2.577 million tonnes.

Codelco's Chief Executive Jose Pablo Arellano told a Chilean newspaper last week that the company aimed to sell 80 percent of its copper via contract in 2010, with only 20 percent going to the spot market. [ID:nN09217041]

One analyst, Wang Zhouyi at Shanghai CIFCO Futures, had predicted China's premium would be $10 over the Japanese and South Korean premium because demand still looked strong.

"It's a seller's market, and the demand is still there. The only uncertainty that might affect the talks is that currently spot prices are still at a discount to futures, showing that there isn't shortage in spot supply," he said.

A big question hanging over the true strength of China's copper demand is the size of stockpiles held at various levels, including government, province, corporate and private investment. [ID:nHKG237063]

"There is a supply story looming," said ANZ's senior commodities analyst Mark Pervan. "But $85 is a very strong number. It's certainly positive for the market. Premiums tend to be a reasonable indicator for demand, and though supply signals -- the stockpiles -- aren't telling us that, it should be enough to keep prices moving higher."

In October, the last month for which data is available, China's imports of unwrought copper and copper scrap fell by more than a third from September. But supplies were bolstered by record domestic production of refined copper in October, which passed 400,000 tonnes for the first time ever. (Additional reporting by Nick Trevethan in SINGAPORE) (Editing by Clarence Fernandez)