China's copper smelters, already getting record high fees for turning raw materials into metal for the country's fast-growing economy, will receive 7 percent more in the next few weeks as supply outstrips demand, smelter officials said. New and expanded mining projects have helped turn a global deficit of copper concentrate into a surplus in the last year, allowing smelters in China - the world's top buyer of the raw material in the spot market - to charge higher fees to overseas suppliers.
"The global concentrate market will be oversupplied for sure this year," an official for a smelter in north-east China said on Monday.
Processing fees charged by smelters to miners have jumped more than six-fold from record lows in the last year, and traders and smelter officials said the upward trend would continue in 2005, particularly during the second half of the year.
They said reduced purchases by China were also prompting overseas copper concentrate suppliers to pay higher spot fees, known as treatment and refining charges and deducted from a base price paid by the smelter for the concentrate.
"The processing fees will rise to $150 (a tonne) and 15.0 cents (a pound) very soon," said an official for the China Smelters Purchase Team, which groups the country's seven largest smelters, including Jiangxi Copper, Yunnan Copper and Tongdu Copper, the listed arm of Tongling Non-ferrous Metals.
Smelter sources said many copper producers were not seeking spot concentrate imports as they had booked sufficient cargoes for the January-March quarter.
Copper prices, which rose 35 percent last year, hitting a 16-year peak in October, encouraged mining firms to expand existing deposits and develop new resources, traders said, adding new supplies of copper concentrate would start arriving in the spot market as early as April.
A year ago many Chinese smelters were anxious that global supplies of copper concentrate were not enough to feed their country's fast-growing demand, as well as new capacity in India and Thailand.
But traders said supplies to China started rising from the second half of 2004 as a result of unexpected production problems in India and Thailand. These problems remain in India, they said.
Sales from Asia's largest copper mine, Indonesia's Grasberg, would rise 50 percent this year to 1.5 billion pounds, said its owner, US mining firm Freeport-McMoRan Copper & Gold Inc.
Output in 2004 was hit by a landslide in December 2003 that forced Freeport to mine lower-grade ores for much of last year.
An official for a smelter in north-west China said his firm had received $140 a tonne for treating and 14.0 cents a pound for refining 20,000-tonnes of South American concentrate, to be loaded in June and October in separate 10,000-tonne cargoes.
In mid-December, the fees were $138 and 13.8 cents.
Fees for another spot cargo of 10,000 tonnes of South American concentrate were close to being concluded at $145 a tonne and 14.5 cents a pound, a trader said.
The source at the north-east smelter said his company was already seeking fees of $150 and 15.0 cents for treating and refining 10,000 tonnes of spot concentrate for delivery in March or April.
Much of the additional supply this year will come from Chile. BHP Billiton, which operates Escondida, the world's largest open-pit copper mine, plans investments of around $1.9 billion between now and 2007.
Three other new mines - Sagasca, Mantos de la Luna and Ojos del Salado - began operating in 2004 and are expected to double production from 23,000 tonnes of copper last year.
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