China Said to Demand 74% Copper Fee Increase From BHP

Smelters in China, the world¡¯s biggest copper consumer, asked BHP Billiton Ltd. and other mining companies to pay 74 percent more to process copper next year, two industry officials involved with the negotiations said.

BHP, the world¡¯s largest mining company, offered to raise fees by 12 percent last week, said the people who asked not to be identified because talks are continuing. BHP spokeswoman Samantha Evans declined to comment when contacted in Melbourne.

The global credit crunch and economic slowdown has led to an oversupply of ore and curbed the ability of mining companies to keep stockpiles, forcing them to offer the first increase in fees since 2006. Higher fees, known as TC/RCs, would revive sagging profits at Tongling Nonferrous Metals Group Co. and other Chinese smelters.

¡°Smelters have more bargaining power now,¡± said Yang Changhua, analyst at Beijing Antaike Information Development Co. If agreed, the fees will be the highest since 2006, he said.

Jiangxi Copper Co., China¡¯s second-biggest smelter by 2007 output, rose 5.5 percent to HK$5.56 in Hong Kong trading. Tongling Nonferrous rose 2.5 percent to 8.16 yuan in Shenzhen trading. Benchmark indexes in China and Hong Kong dropped as much as 2.6 percent.

Miners including BHP Billiton are talking with smelters in China, Japan and India to renew calendar-year contracts. The fees in China for 2008 were cut by 21 percent to $47.2 a metric ton for smelting ore and 4.72 cents a pound for refining, when there was a shortage of ore.

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