DJ reported that Jiangxi Copper Company expects copper treatment and refining charges to drop 2010 on tight concentrate supply but is still seeking 2010 treatment charges above USD 50 per tonne.

A company official familiar with negotiations said that Jiangxi Copper is currently holding preliminary discussions with global miners BHP Billiton and Freeport McMoRan Copper & Gold Inc on 2010 TC/RCs.

The 2 miners had offered treatment charges of USD 75 per tonne and refining charges of 7.5 cents per lb for 2009 but a series of mine closures amid accidents and labor disputes has reduced concentrate supply to a level where market participants are now talking about the likelihood of TC/RCs falling below USD 45 per tonne and 4.5 cents per lb in 2010.

The official said that a treatment charge of USD 75 per tonne is not possible in 2010."

Mr Yang Jun GM of Tongling Nnonferrous Metals International Trading Company and the group chief negotiator in TC/RCs said that Tongling Nonferrous Metals Group is also in talks with BHP Billiton and Freeport on 2010 TC/RCs. He however declined to provide further detail citing commercial sensitivity.

TC/RCs represent the profit margin of copper smelters and in times of tight concentrate supply, smelters are forced to lower these charges to ensure sufficient availability of the raw material to keep their smelters running. Spot market TCs are now around USD 20 per tonne and RCs around 2.0 cents per pound amid a tight concentrate market because of a number of mine accidents and strikes, as well as lower output at key mines such as the BHP Billiton Limited operated Escondido mine in Chile.

BHP said that output at the mine in fiscal 2009 will fall 30% a drop of roughly 366,000 tonnes because of repairs to mills which have ended. Strikes such as the now 4 week long work stoppage at the Spence mine in Chile owned by BHP, highlight the potential for more disruptions. A number of other mines in Chile are due to renew labor contracts before the end of the year.

The Jianxi official said that some industry participants expect 2010 TC/RCs to be settled around USD 50 per tonne and 5.0 cents per lb, 33% lower than 2009 fees and Jiangxi Copper would certainly like to see 2010 TCs settled higher than USD 50 per tonne.

(Sourced from Dow Jones)