Contract negotiations between global mining companies and Japanese copper producers over copper treatment and refining charges for 2011 are likely to see the fees rise 29% from 2010 levels, Goldman Sachs said in a report dated Monday.

The charges, known as TC/RCs, are likely to rise to $60 a metric ton and 6 cents a pound with smelters in a stronger bargaining position than last year, as spot treatment and refining charges have risen to $80/ton and 8 cents/lb in China, the bank said.

TC/RCs are paid by miners to smelters to turn copper concentrate into copper cathode. They are the key source of revenue for smelters, and tend to fall when concentrate availability is scarce and smelters are forced to offer competitive fees to attract limited business.

Conversely, TC/RCs tend to rise when copper concentrate supply exceeds available smelting capacity.

The rise in spot TC/RCs in China has been widely attributed to the temporary closure of some smelters in the country for maintenance.

A conservative attitude to production by Japanese smelters could also support contract TC/RCs, with Japan's copper cathode output stagnating in recent years due to what the smelters regard as unprofitable TC/RC levels.

Nikkei reported that the largest four Japan copper producers plan to turn out a combined 673,920 tons of the red metal from October 2010-March 2011, 10.1% below their combined capacity.

However, despite its forecast of a jump in 2011 TC/RCs, Goldman Sachs said that the copper concentrate market was likely to remain in a "notional" deficit in 2011, due to, "impressive growth in Chinese smelting capacity, coupled with sluggish growth in global concentrate supply."

The annual contract negotiations are conducted by the biggest copper mining companies, including Freeport McMoran Copper & Gold Inc. (FCX) and BHP Billiton (BHP.AU), and Japanese smelter operators including Pan Pacific Copper Co., Sumitomo Metal Mining Co. (5713.TO) and Mitsubishi Materials Corp (5711.TO).

-By James Campbell, Dow Jones Newswires, +656415-4082; james.campbell@dowjones.com
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