Japan Smelters Fail to Settle Copper Ore Talks with Miners

Japanese copper smelters’ ore purchase price negotiations for 2007-08 shipment could take longer enough to enter 2007 as last year. They had talk with major miners including BHP Billiton and Freeport-McMoRan Copper & Gold on December 15. They apparently failed to conclude the talk when Japanese smelters seek better ore purchase condition including payment condition and price participation terms though miners don’t disclose the offers.

BHP Billiton already settled the negotiation with other smelters including LS-Nikko Copper of South Korea and Sterlite Industries of India at US$ 60 per tonne of treatment charge and 6 US cents per pound of refining charge without price participation. With the favorable precedent, the miners could offer same condition to Japanese smelters.

Japanese smelters try to improve the ore purchase payment condition and price participation terms, for which they compromised at mid-year negotiation for July 2006-June 2007 shipment. Japanese smelters won to keep the price participation system. However, the basic price increased from 120 US cents per pound to 90 US cents with ceiling at 180 US cents.

Japanese smelters pay for ore in 3 days after the ore arrives at landing port. However, the smelters take around 3 months to make copper ingot through the smelting processes. Japanese smelters try to change the payment system to allow payment in 3 months after the arrival when they are suffered from higher interest cost with unfavorable price participation terms.