UPDATE 1-Japan Pan Pacific to agree rise in 2013 TC/RC -source

Wed Dec 19, 2012 5:08am EST

Related Topics

* TC/RCS seen settling up 11 percent versus year ago

* TC/RCS seen settling at $70.0-$79.0/T and 7-7.9 U.S cents a pound

* Deals substantially above spot market terms of $58/5.8 to $62/6.2

By Osamu Tsukimori and Melanie Burton

TOKYO/SINGAPORE, Dec 19 (Reuters) - Japan's biggest copper smelter, Pan Pacific Copper, and a major global miner are set to agree on an increase of at least 11 percent in treatment and refining charges (TC/RC) for 2013, a source at the Japanese company said on Wednesday.

This would be the first major TC/RC deal for next year as producers have delayed striking terms that would normally have been settled by December due to rising mine supply and slowing global demand given a gloomy economic climate.

As such the terms of Pan Pacific's deal with the major miner would likely influence other TC/RC talks in the region, although in the last year or two final terms have diverged among participants with some miners demanding lower charges for cleaner, high grade concentrate.

"It is an important figure. It doesn't mean that everyone will settle at the same level, but it sends a very strong signal to the market," said analyst Duncan Hobbs of Macquarie in London.

"We've been thinking that TC/RCs would increase by upwards of 10 percent for contract business in 2013. From a smelter's point of view, it's a good number," he added.

The two companies are likely to settle somewhere in the range of $70.0 to $79.0 a tonne and 7.00 U.S. cents to 7.90 U.S. cents a pound for the charges, up from $63.0 and 6.30 cents for the whole of 2012, said the source, who has direct knowledge of the terms.

An agreement may come by the end of the year, the source added, declining to be named as the talks were confidential.

Global miners pay TC/RC to smelters to convert concentrate into refined metal and the charges are deducted from the sale price based on LME copper prices. Higher charges are typically seen when concentrate supply rises.

Earlier this month, China's copper smelters lowered their expectations for 2013 TC/RCS to $70-$75 and 7-7.5 cents, from $80 a tonne and 8 cents a pound.

The benchmark terms are substantially higher than the spot market, where recent tenders were in a tight range of $58/5.8 to $62/6.2, a concentrate trader in Europe said.

Miners typically agree to pay higher fees for material sold on contract because they have a guaranteed buyer.

In early talks with Chinese smelters BHP offered $60 and 6 cents while Freeport did not put a figure on the table.

The International Wrought Copper Council expects global mine supply to expand 6.5 percent to more than 17.7 million tonnes in 2013, versus a 3 percent growth this year.

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