Codelco Slashes China Copper Fee to Six-Year Low (Update2)

Chile's Codelco, the world's biggest copper producer, cut the surcharge on sales to China by 32 percent to a six-year low to encourage buyers to enter long-term contracts as global growth slows.

The company will reduce its fee, added to copper prices to cover shipping and insurance costs, to $75 a metric ton for China in 2009 from $110 a ton this year, said three industry executives involved in the talks this week. China is the world's top consumer of the industrial metal.

Copper prices have plunged by more than half from a record $8,940 a ton in July to a three-year low as the global credit crunch pushes the world into an economic recession, cutting demand for raw materials. The reduction in fees may force major Chinese copper producers, including Tongling Nonferrous Metals Group Co., to lower prices to stay competitive.

The reduction ``isn't big enough compared with the plunge in freight rates,'' Yang Changhua, an analyst at Beijing Antaike Information Development Co., said by phone today. ``We expect fewer long-term contracts from China next year'' as companies opt for spot purchases given the market volatility.

The Baltic Dry Index, a measure of shipping costs for commodities, has shed 93 percent from a record in May and fallen this year to the lowest since 2001.

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