* Freeport to pay 31 pct more in 2014 TC/RC to Chinese
* Agreed TC/RC of $92/T, 9.2 cents/lb to pressure BHP to
raise earlier offer
* BHP in second-round talks this week with smelters
By Polly Yam
HONG KONG, Nov 18 U.S. miner Freeport-McMoRan
Copper & Gold Inc has agreed to pay nearly a third more
in annual processing charges to China's leading copper smelters,
likely increasing the pressure on rival BHP to raise
its own offer on the charges.
The higher charges reflect expectations for growing mine
supply pushing the market into a widening surplus next year and
keeping a lid on copper prices.
China's no. 1 producer, Jiangxi Copper Company Ltd
, has agreed with Freeport to treatment and refining
charges (TC/RC) of $92 per tonne and 9.2 cents per pound for
term copper concentrate shipments in 2014, sources said on
Monday, setting the benchmark for the region.
That is 31 percent higher than the processing charges of $70
and 7 cents charged by the smelters from Freeport this year.
Other smelters in China have followed suit and struck similar
deals with Freeport.
Miners pay TC/RCs to smelters to convert concentrate into
refined metal, with charges deducted from the sale price. The
charges typically rise when supply increases.
"$92 and 9.2 cents should be China's benchmark for 2014,"
said a source at Jiangxi Copper with direct
knowledge of the agreement.
The two companies had taken two days to reach a deal on the
charges, the source added.
But the processing charges are lower than the more than $100
and 10 cents originally sought by Chinese smelters and $113-$115
and 11.3-11.5 cents in the spot market in Asia this month.
Freeport, which runs the world's second-biggest copper mine
in Indonesia, did not immediately respond to an email from
Reuters seeking comment on the agreed charges sent outside
GROWING METAL SURPLUS
BHP typically produces high grades and has offered
lower charges than Freeport to Chinese smelters in 2013 and
Still, the Anglo-Australian miner's opening gambit of $80
and 8 cents offer to Chinese smelters last week now looks very
low, and it could be under pressure to hike the rate, industry
BHP is meeting the smelters for second-round talks this
week, they said.
"There should be just one China benchmark. It is $92 and 9.2
cents for 2014. We don't know what BHP would do next, but we
certainly would not agree $80 and 8 cents," said a trading
manager at one large smelter that signed up with Freeport.
Chinese smelters have threatened to take a 'holiday' with
BHP if they could not reach an agreement with the miner. A
'holiday' means Chinese smelters would not take BHP concentrates
in 2014 under multi-year contracts using yearly TC/RCs.
Some Chinese smelters took a holiday for BHP term contracts
this year after the miner offered $68 and 6.8 cents for 2013
shipments. The smelters still received some concentrates from
BHP, using spot TC/RCs, sources at smelters said.
Projections for a growing copper surplus next year as mine
supply picks up have dampened spot prices for the metal - they
hit three-month lows last week.
Analysts expect the global copper market to post a surplus
of 182,000 tonnes this year, up from a previous forecast of
153,000 tonnes, and then balloon to a 328,000-tonnes surplus in
2014, according to a Reuters poll last month.
"It's probably a more realistic view of the market, given
the market has moved into surplus - and the magnitude of that
surplus," analyst Robin Bhar of Societe General in London said
of Freeport's deal with the Chinese smelters.