* H1 TC/RCs settled at $99 per tonne and 9.9 cents per pound
* BHP's TC/RC higher than 2014 benchmark for full-year
* Smelters in strong negotiating position as concentrate
By Polly Yam
HONG KONG, Dec 9 Miner BHP Billiton has
agreed to pay a 41 percent rise in copper processing fees to
China's large smelters for the first half of 2014, sources said,
showing smelters are in a strong negotiating position as supply
of concentrates rises.
The smelters and Anglo-Australian BHP have agreed to
treatment and refining charges (TC/RC) of $99 per tonne and 9.9
cents per pound for term concentrate shipments in January to
June 2014, two sources at smelters said on Monday.
That compares to the $70 and 7 cents the two sides
negotiated for shipments in July to December 2013 and is more
than the 2014 benchmark rate for full-year shipments.
The rise in the charges reflects an expected supply increase
in the global copper concentrate market next year. More
concentrate supply would encourage smelters to make more metal,
which could pressure copper prices.
The charges are higher than the 2014 benchmark of $92 and
9.2 cents agreed between Chinese smelters and other miners such
as Freeport-McMoRan Copper & Gold Inc.
But they are lower than the spot TC/RC of about $130 and 13
cents for clean, standard concentrates to China.
Global miners pay TC/RC to smelters to convert concentrate
into refined metal, with the charges deducted from the sale
price, based on London Metal Exchange copper prices
. Higher charges are typically seen when concentrate
"We have settled with BHP at $99 and 9.9 cents for half-year
shipments," said a source at a large copper smelter who had
direct knowledge of the deal.
A manager at another large smelter said the firm had signed
the same TC/RC with BHP and would continue to negotiate with the
miner for full-year shipments.
BHP had not given a new figure for full-year shipments to
China after the smelters there rejected the miner's offer of $80
and 8 cents last month, he added.
"We don't comment on pricing," a BHP media relations manager
in Australia said in an email to Reuters.
The deals with BHP were reflective of smelters regaining
some negotiating power, said Michael Widmer, analyst at Bank of
America Merrill Lynch.
"It shows the current environment of having more concentrate
supply coming through generally, but at the same time the
smelters did not get the maximum that they wanted."
Chinese smelters had planned to ask global miners to pay
TC/RCs of about $105 and 10.5 cents for term shipments in 2014.
A source at a miner said the jump between the initial offer
by BHP to the Chinese smelters and the agreed TC/RC suggested
the miner recognized its first offer might have been a bit
"I was surprised BHP is giving $99 and 9.9 cents. The strong
charges reflect that miners are afraid they can't sell all
production next year," a trader at a small Western miner said.
He added that TC/RCs for term shipments in July to December
2014 could be higher compared to the $99 and 9.9 cents for the
first half as new projects were expected to come onstream and
given that spot TC/RCs had risen more than 10 percent in the
A deal for 30,000 tonnes of clean, standard African
concentrate was sold at TC/RC of $130 and 13 cents last week to
China, the trader said.
The bulk of the spot deals had changed hands at TC/RCs of
about $115-$120 this month, compared to about $113-$115 in
October and November, the sources at smelters said.