Pan Pacific Copper Co., Japan’s largest producer, won a 13 percent increase in 2012 copper ore processing fees from Freeport-McMoRan Copper & Gold Inc., according to two industry executives familiar with the matter.
The fees for turning concentrate into refined metal were set at $63.50 a metric ton and 6.35 cents a pound, the executives said, asking not to be identified as the agreement is private. The fees are known as treatment and refining charges, or TC/RCs.
Copper, used in pipes and wires, fell more than 20 percent into a bear market after reaching a record $10,190 a ton in February amid concern Europe’s debt crisis will curb demand in the region that accounts for about 19 percent of global consumption. Increasing fees boost smelters’ revenue.
“With top smelters in China and Japan settling at the same level, other smelters as well as other mining companies, such as BHP Billiton Ltd., will follow suit,” said Takashi Murata, an analyst at Daiwa Securities Capital Markets Co. in Tokyo. “The increase may help alleviate Japanese smelters’ difficult business situation under the strong yen.”
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.
Calls to Kouichi Shirai, Pan Pacific Copper’s spokesman and Eric Kinneberg, spokesman for Phoenix-based Freeport, weren’t answered outside of business hours.
Pan Pacific’s deal comes after an agreement between Jiangxi Copper Co. and Freeport at the same level. Pan Pacific is a joint venture between JX Nippon Mining & Metals Corp., a unit of JX Holdings Inc., and Mitsui Mining & Smelting Co.
The increase in processing fees reflects that the current tightness in supplies may not last long and labor disputes may be resolved soon, Murata said.
Workers at Freeport’s Grasberg mine in Indonesia extended their strike for a third month until Dec. 15, a labor union said Nov. 9. About 8,000 workers at Grasberg have been on strike since Sept. 15 demanding higher wages. In October, Freeport declared force majeure on some shipments, a legal clause allowing companies to miss deliveries because of circumstances beyond their control.
The metal for three-month delivery on the London Metal Exchange rose 1.3 percent to $7,890 a ton yesterday.
Freeport runs the Grasberg mine, which has the world’s largest recoverable reserves of copper. Japan imported 1.3 million tons of copper in concentrate in 2010, 20 percent of which it bought from Indonesia, according to data from the Japan Mining Industry Association.
Pan Pacific Copper Co. said on May 19 that it agreed with BHP Billiton Ltd. to $90 and 9 cents for July 1 to December 31, up from $70 and 7 cents in the first half.
The fees are typically negotiated twice a year, with most of the volume handled through the year-end accords. In June, fees were set $85 and 8.5 cents for the so-called mid-year contracts that began July 1, up from $39 and 3.9 cents a year earlier.