London 06/07/2016 - BHP Billiton has settled mid-year annual copper concentrates treatment and refining charges (TC/RCs) with two key smelters in Japan and South Korea in the triple-digits, industry sources claimed.
A rate of "$100-103 per tonne/10-10.3 cents per pound is for South Korea and a similar level is for the Japanese," a source with direct knowledge of the deals said.
The deals, which cover the July 2016-June 2017 period, took around a month to negotiate, sources said.
One smelter is understood to have booked around 100,000 tonnes of concentrates with the producer while another booked roughly 80,000 tonnes. Both contracts are for ther supply of concentrates from BHP's majority-owned Escondida mine in Chile, FastMarkets understands.
BHP declined to comment.
The agreements are lower than the bids of $110/11 cents smelters had requested when talks started at the beginning of June. Still, the settlement is higher than the initial offers the miner tabled at the high $80s/8 cents and $95/9.5 cents respectively.
It is also higher than quarterly deals agreed with Japanese and Korean smelters at $86-90/8.6-9.0 cents and $83-85/8.3-8.5 cents in the first and second quarters respectively.
The bottom line for the smelters was widely believed to $100, in line with initial deals between BHP and Chines smelters concluded at that level for the second half of this year.
"BHP did compromise but then smelters aimed for $103 after the CSPT meeting," a concentrate trader said.
On June 24, the China Smelters Purchasing Team (CSPT) decided to lift its lower limit for third-quarter copper concentrate purchases by 21 percent to $103 /10.3 cents in line with a rising spot market.
"It's a very clear signal that the [TC/RCs] market is up - that's why the Koreans and Japanese want a similar number as the Chinese did,” a second concentrate trader said.
Spot TC/RCs for sales to smelters have increased over the past month - spot tonnages climbed to $100-105/10-10.5 cents at the end of June from $97-102/9.7-10.2 cents a month earlier due to ample supply.
BHP Billiton has been trying to move away from annual supply contracts for years, preferring to sell under shorter-term contracts - by the quarter or the half-year. Consequently, it does not follow the industry benchmark, which for 2016 has been set at $97.35/9.735 - following a key agreement in December between miner Antofagasta and Chinese smelter Jiangxi Copper.
(Additional reporting by Vicky Chen, editing by Mark Shaw)