Sumitomo Sees Higher Copper Fees in 2013 as Supplies Rise
Sumitomo Metal Mining Co. (5713), Japan’s second-largest copper producer, expects higher processing fees next year as raw material supply from new and existing mining projects will probably increase.
The fees, known as treatment and refining charges or TC/RCs, for copper concentrate, or semi-processed ore, will increase from this year’s level of $63.50 a metric ton and 6.35 cents a pound agreed between Freeport-McMoRan Copper & Gold Inc. (FCX) and major Japanese producers, President Nobumasa Kemori said.
Sumitomo Metal Mining joins JX Nippon Mining & Metals Corp. and Aurubis AG (NDA) in seeking higher fees. World mine output may increase 14 percent to 14.45 million tons in 2013, while smelting capacity may rise 11 percent to 16.26 million tons with operating rates of 89 percent, according to data from Pan Pacific Copper Co. Increasing fees boost smelters’ revenue.
“Spot TC/RCs have been increasing” as the yen’s strength against the dollar reduced margins for Japanese smelters and Chinese buyers were reluctant to purchase concentrate because of the unfavorable difference between prices in Shanghai and London, Kemori said in an interview yesterday. The yen has strengthened 7.9 percent since the year’s high of 83.20 on March 15.
TC/RCs in the spot market are likely to gain in the next several months and are at about $70 and 7 cents, Aurubis said in a report Sept. 25. Treatment fees are expressed in dollars per ton of concentrate received and refining fees in cents per pound of copper in the ore. The fees are deducted from the price paid by smelters to mining companies for the raw material.
Copper in London has climbed 8.8 percent this year and traded at $8,267 a ton at 3:36 p.m. in Tokyo. The metal reached a four-month high Sept. 19 after the Federal Reserve and European Central Bank said they would buy more debt and China, the biggest copper user, approved a $158 billion subways-to- roads construction plan.
Sumitomo Metal Mining has plans to participate in overseas mine development projects to achieve output of 300,000 tons from its own mining interests by 2020 from 120,000 tons currently. The company is reviewing two to three mine projects in South America, Kemori said.
The company will add 60,000 tons of copper output from its mining interests by that time and its Sierra Gorda mine in Chile, which is scheduled to start in 2014, will add 70,000 tons, Kemori said May 17. The final 50,000 tons will be secured through other foreign mine investments, with projects in Canada, the U.S, Chile, Peru and Argentina being considered, he said.
The Sierra Gorda project plans to initially produce 110,000 tons of copper in concentrate a year before increasing capacity to 190,000 tons by 2017, Kemori said. Sumitomo Metal owns 31.5 percent and Sumitomo Corp. (8053) has a 13.5 percent holding in the project, while KGHM International Ltd. holds a 55 percent stake.
Sumitomo Metal Mining already has stakes in mines including Morenci in the U.S., Candelaria, Cerro Verde and Ojos del Salado in Chile, Northparkes in Australia and Batu Hijau in Indonesia, the company’s website said. The company’s shares rose 0.9 percent today to close at 985 yen in Tokyo.
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