China Copper Smelters Deal with Freeport-McMoran Could Pressure BHP

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Freeport-McMoRan Copper & Gold Inc has struck a deal with China’s leading copper smelters, “[agreeing] to pay nearly a third more in annual processing charges…likely increasing the pressure on rival BHP to raise its own offer on the charges,” reports Reuters.

“The higher charges reflect expectations for growing mine supply pushing the market into a widening surplus next year and keeping a lid on copper prices.”

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“China’s no. 1 producer, Jiangxi Copper Company Ltd (0358.HK), has agreed with Freeport to treatment and refining charges (TC/RC) of $92 per tonne (1 tonne= 1.102 metric tons) and 9.2 cents per pound for term copper concentrate shipments in 2014, sources said on Monday, setting the benchmark for the region.”

“That is 31 percent higher than the processing charges of $70 and 7 cents charged by the smelters from Freeport this year. Other smelters in China have followed suit and struck similar deals with Freeport.”

The week’s biggest mover on the weekly Copper MMI® was the cash price of primary copper, which saw a 2.5 percent decline on the LME to $6,939 per metric ton. This week marked the third in a row of declining prices for the metal. The 3-month price of copper fell 2.4 percent on the LME over the past week to $6,949 per metric ton. This was the third week in a row of declining prices.

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Chinese copper prices were mixed for the week. The price of Chinese copper wire finished the week down 1.7 percent. Closing out the third week of declining prices, the price of Chinese copper bar dropped by 1.6 percent. For the third week in a row, the cash price of Chinese copper dropped, falling 1.6 percent. Chinese bright copper scrap saw its price rise 1.0 percent over the past week.

The price of US copper producer grade 122 dropped 2.0 percent this week, closing out the third consecutive week of falling prices. The price of US copper producer grade 110 fell 2.0 percent over the past week. This was the third week in a row of declining prices. Closing out the third week of declining prices, the price of US copper producer grade 102 dropped by 1.9 percent. The cash price of primary Japanese copper dropped 1.2 percent this week, closing out the third consecutive week of falling prices. Prices for Korean copper strip remained constant.

The Copper MMI® collects and weights 12 global copper metal price points to provide a unique view into copper price trends. For more information on the Copper MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.