Codelco, the world’s biggest copper producer, will raise the surcharge on sales to Japan and South Korea by as much as 16 percent next year as demand from China lifts metal prices.

The premium will be $74 a metric ton in 2010 versus $65 this year for Japan and $64 for South Korea, said two company executives who received a copy of the notice. The charges are added to London immediate-delivery prices to reflect regional supply and demand and to cover shipping and insurance costs.
Copper, used in pipes and power cables, has more than doubled in London this year as China’s 4 trillion yuan ($586 billion) stimulus spending and state stockpiling boosted the country’s imports to a record. The fee increase by Santiago, Chile-based Codelco sets a benchmark for other producers and may spur Freeport-McMoRan Copper & Gold Inc. and Pan Pacific Copper Co. to follow suit.
Codelco’s increase for Japan and South Korea, the first since 2007, comes amid forecasts for rising demand as the global economy recovers from its worst recession since World War II. Three-month delivery copper on the London Metal Exchange reached $6,732 a ton on Oct. 26, the highest since September 2008. The metal closed at $6,490 a ton Friday.
The fees for Chinese buyers would likely be about the same as the charges for Japan and South Korea, or perhaps only slightly different, Gu Liangmin, general manager of the copper department at China Minmetals Nonferrous Metals Co., said today. The 2009 premium was $72 to $75.
Chinese and Codelco executives are slated to meet in mid-November to discuss the fees, Gu said.
Global recession
Codelco won’t comment on surcharges until it has finished its sales campaign for this year, which won’t be until the end of this month, according to a company spokeswoman who declined to be named in accordance with internal rules.
Codelco’s premium charged to buyers in Europe will remain unchanged next year at $80 a ton, a person with knowledge of the situation said in September.
The company, owned by the Chilean government, last year cut the 2009 surcharge for sales to Asia by more than 30 percent to the lowest level since 2003 as the global credit crunch following the collapse of Lehman Brothers Holdings Inc. pushed the world into recession.
Codelco’s decision to leave European prices on hold due to the sluggish regional economy led analysts to expect a rise in Asian premiums of between 5 and 10 percent, according to Robin Bhar, a metals analyst at Calyon in London. The larger-than- expected increase may help copper rise by $20 to $30 per ton when the London market opens on Nov. 9, he said.
“This is not unexpected but it is a positive sign for copper,” he said.
“The big story this year has been the huge rebound in the copper price and that has been largely because of very healthy Chinese demand. The increase in copper premiums is due to that one thing: China.”
Other refined copper producers such as Melbourne-based BHP Billiton Ltd. and Anglo American Plc will probably follow Codelco’s lead, Bhar said.
Southern Copper Corp., the largest producer in Peru and Mexico, forecast this month that prices may rise to $4 a pound next year because of recovering economic growth in the U.S. and Europe and a lack of new supply. The December-delivery contract on the Comex division of the New York Mercantile Exchange closed at $2.9525 a pound Friday.
“By next year, the American economy and most of Europe will have recovered from the crisis and consumption will be up,” Southern Copper Chief Executive Officer Oscar Gonzalez Rocha said Nov. 3 in an interview in Lima. “Nor will there be many mines coming online in that timeframe,” he said.
China’s copper imports more than doubled in the first nine months to 2.6 million tons, according to customs data.
(Source: Bloomberg)