Pan Pacific Copper Co., Japan’s biggest producer of the metal, said it may increase the premium it charges customers in China by 53 percent next year as demand increases.
“We are thinking of annual premiums to Chinese clients at about $130 a metric ton for 2014,” said Yoshihiro Nishiyama, an executive officer in the Tokyo-based company’s marketing department. This compares with the 2013 surcharge of $85 over the cash price on the London Metal Exchange, he said at a briefing today.
Codelco, the world’s top producer, is preparing to set its annual sales premiums for buyers in Europe and Asia, including China, the world’s top user. The Chilean company, which sets a benchmark for producers each year, settled its 2013 premium for China at $98 a ton, down from $110 in 2012 as demand slowed.
Pan Pacific may conclude its negotiations for 2014 sales later this month, Nishiyama said.
Premiums for copper for immediate delivery jumped to $210 a ton for Shanghai in August as stockpiles at bonded warehouses dropped in China amid a shortage of scrap, he said. The premiums include insurance and shipping costs.
The company projected the global surplus of refined copper to increase more than fourfold in 2014, rising for the second straight year, as Chinese production outpaces demand. Supply will exceed demand by 305,000 tons, compared with 69,000 tons estimated for this year, according to Pan Pacific.
China’s output will increase 9.7 percent to 7 million tons in 2014, while the country’s demand will grow 4.5 percent to 9.2 million tons, the company said. Pan Pacific forecast that world mine output will increase by 13 percent to 16.2 million tons in 2014.
Japanese smelters, including Pan Pacific, will negotiate with mining companies including BHP Billiton Ltd. and Freeport-McMoRan Copper & Gold Inc. later this year to settle processing fees of next year’s raw material supply.
“With mine supply increasing, we are looking for higher treatment and refining charges for next year, close to $100 a ton and 10 cents a pound,” said Shigeru Oi, an executive officer for raw materials at Pan Pacific. “Electricity bills have jumped for Japanese smelters, increasing our costs.”
Smelters and mining companies settled 2013 processing fees at $70 a ton and 7 cents per pound, he said. Spot processing fees have recently risen to about $80/8 cents, he said.
The fees usually rise when mine supply increases. 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.
Pan Pacific is the joint venture between JX Nippon Mining & Metals Corp., a unit of JX Holdings Inc., and Mitsui Mining & Smelting Co.