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Jiangxi Copper gets higher fees
By Helen Yuan |
January 24, 2009, Saturday
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Print Edition
Print Edition
BHP Billiton Ltd, the world's largest mining company, agreed to increase processing fees paid to China's Jiangxi Copper Co by about 60 percent, an executive directly involved in the talks said.
The fees are US$75 a ton for smelting ore and 7.5 cents a pound for refining, said the executive, who asked not to be identified because the talks are confidential. That's less than the 74-percent rise Chinese smelters have asked for and more than the 12 percent offered by Melbourne-based BHP.
The global credit crunch and economic slowdown have led to an oversupply of copper ore and curbed the ability of mining companies to keep stockpiles, forcing them to offer the first increase in fees since 2006. Higher fees, known as TC/RCs, would revive sagging profits at Jiangxi Copper, China's second-largest copper smelter, and its rivals.
"Smelters will raise utilization rates," Peng Bo, an analyst with Ping An Securities Co, told Bloomberg News. "China relies mostly on concentrate imports."
The fees match what Jiangxi Copper agreed with Freeport-McMoRan Copper & Gold Inc, the world's second-largest copper producer. The break-even fee level for Chinese smelters is about US$60, Peng said.
Jiangxi Copper will boost output by 12 percent to 800,000 tons this year, Wang Chiwei, executive director and vice president at the company, said on Monday. Other Chinese smelters would also increase output this year, he said.
The Jiangxi Province-based company needs imports to meet 70 percent of its copper concentrate consumption, according to Peng.
A BHP spokeswoman declined to comment when contacted in Melbourne.
The fees are US$75 a ton for smelting ore and 7.5 cents a pound for refining, said the executive, who asked not to be identified because the talks are confidential. That's less than the 74-percent rise Chinese smelters have asked for and more than the 12 percent offered by Melbourne-based BHP.
The global credit crunch and economic slowdown have led to an oversupply of copper ore and curbed the ability of mining companies to keep stockpiles, forcing them to offer the first increase in fees since 2006. Higher fees, known as TC/RCs, would revive sagging profits at Jiangxi Copper, China's second-largest copper smelter, and its rivals.
"Smelters will raise utilization rates," Peng Bo, an analyst with Ping An Securities Co, told Bloomberg News. "China relies mostly on concentrate imports."
The fees match what Jiangxi Copper agreed with Freeport-McMoRan Copper & Gold Inc, the world's second-largest copper producer. The break-even fee level for Chinese smelters is about US$60, Peng said.
Jiangxi Copper will boost output by 12 percent to 800,000 tons this year, Wang Chiwei, executive director and vice president at the company, said on Monday. Other Chinese smelters would also increase output this year, he said.
The Jiangxi Province-based company needs imports to meet 70 percent of its copper concentrate consumption, according to Peng.
A BHP spokeswoman declined to comment when contacted in Melbourne.
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