Japan Copper Smelters in Tough Ingot Sales Talk with Users

Japanese nonferrous smelters are in severe talk for long term copper ingot supply contract for 2008 shipment with major users including electric wire and rolled copper makers. They already agreed to reduce premium on international market price as Japan premium of Corporaci?n Nacional del Cobre of Chile. However, the smelters try to revise the collateral condition but the users resist the revision. The users are apparently cautious when they cannot see the impact of building standard law on the actual demand. CODELCO noticed in October the firm reduces Japan premium by US$ 13 to US$ 120 per tonne for 2008 shipment from 2007, which is added on ingot price at London Metal Exchange. Japanese smelters also reduce the premium by around 1,500 yen per tonne for domestic users. The lower premium reduces the profit for the smelters. The largest smelter, Pan Pacific Copper seeks revision of collateral condition. The firm tries to narrow delivery volume change option to reduce inventory cost while the firm allowed the users to change the acceptance flexibly within the annual contract volume. The firm also seeks earlier payment for the ingot when the firm has to pay in 2 days for ingot from LME warehouse while the users traditionally pay by end of the month for middle of the month delivery. The firm also tries to pass the higher freight. The users try to see the impact of slower building market for the business. They are reluctant to fix the purchase volume with the uncertainty. A major electric wire maker said the firm cannot increase the contract volume.