Pan Pacific to Offer 15% Cut in Copper Premium for China

Pan Pacific Copper Co., Japan’s largest producer, offered a 15 percent cut in next year’s premium for refined metal supplied to clients in China and Taiwan, said two executives with knowledge of the pricing.

The Tokyo-based company is proposing to reduce the fee to $85 a metric ton over the price of metal for immediate delivery on the London Metal Exchange, said the executives, who asked not to be identified because the information isn’t public.

Pan Pacific’s offers for 2013 came before Codelco, the world’s largest copper producer, sets its annual sales premiums for buyers in Europe, South Korea and China. Premiums of copper cathode sales decline when the market sees more supply. The premium includes shipping and insurance costs.

“The decline is largely within our expectation as supply will exceed demand next year,” said Syusaku Nishikawa, an analyst at Daiwa Securities Co. “Concern about Europe’s debt crisis and China’s slowing growth has dimmed the global demand outlook.”

Australia & New Zealand Banking Group Ltd. expects Codelco’s annual premiums for Europe to decline to around $85 and $87 a ton in 2013 from $90 a ton this year, the bank said Oct. 1. Codelco was offering Chinese buyers a $5 cut on 2013 annual premiums to around $105 a ton, ANZ said.

Pan Pacific’s negotiations for annual supply contracts with customers in China and Taiwan have been delayed this year following recent tension over disputed islands known as Senkaku in Japan and Diaoyu in China, the executives said. The company is a venture between JX Nippon Mining & Metals Corp. and Mitsui Mining & Smelting Co. (5706)

Copper for three-month delivery on the London Metal Exchange rose 0.4 percent to $8,325 a ton at 4 p.m. Tokyo time.

To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net