Copper treatment charges may drop on fall in supply
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Copper treatment charges may fall as much as a third as BHP Billiton Ltd, the world’s largest mining company, leads talks with Asian smelters competing for dwindling supplies of concentrate, according to Citigroup Inc.
TALKS
BHP indicated it wants to cut the treatment charge to $40 a tonne and the refining charge to 4 cents a pound, from $60 and 6 cents, analysts from Citigroup led by Mr. Alan Heap said in a report. BHP is leading producer talks with Japanese, Indian and Chinese copper smelters that started last month.
Mining companies including BHP were last year successful in reducing fees paid to smelters as well as ending a 30-year-old so –called “price participation” clause allowing smelters to benefit from rises in copper prices.
Spot treatment charges have fallen to a three-year low as concentrate supply shrinks and smelting capacity expands in China, Citigroup said.
“BHP Billiton was spectacularly successful last year in reducing total fees paid by miners to smelters by about 70 per cent with the removal of price participation.’ Citigroup, the biggest US bank, said in the June 1 report. The company ‘looks set to again capitalize on a favourable market” the analysts said.
OPPOSITION TO CUT
The price of the metal has risen 23 percent this year, helping to boost profits for producers such as BHP and Codelco, the World’s largest producer. Ms Samantha Evans, a spokeswoman for BHP, said the company doesn’t comment on rumour and speculation. Smelters are opposed to the cut and have suggested a rollover in prices, Citigroup said.
Treatment and refining charges for copper sold on the spot market have recently dipped to 420 a tonne and 2.2 cents a pound, Citigroup said.
‘CHARGE REBOUND’
Treatment and refining charges may rebound this year Jiangxi Copper co., China’s second – biggest producer of the metal said in April. Higher copper prices have spurred demand for scrap metal as an alternative and may help drive and increase in charges, Jiangxi said.
Growth in china’s production of refined copper may slow this year as the government takes actions against excessive investment in smelter capacity, Jiangxi Copper said. The amount of copper recycled from scrap worldwide in 2006 increased 7 per cent over the previous year, the company said, citing figures from the International Copper study Group.
Smelters pay miners and agreed base price for metal contained in the raw material minus treatment charges, which are adjusted each year to reflect costs and the outlook for supply and demand.
Treatment and refining charges relate to the process of turning copper ore and concentrates into refined metal.
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Source : Business Line |
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