U.S. Markets open in 5 hrs 21 mins

Eyeing Freeport's Indonesia copper exports, China smelters freeze spot buys

* Smelters expect TC/RCs to rise to $110/11 cts on Freeport export restart

* Freeport to be allowed to export 756,000 T concentrate in H2-Indonesia

* Sellers this week offer TC/RCs at $84-$90/8.4-9 cents

By Polly Yam

HONG KONG, July 25 (Reuters) - Chinese copper smelters are holding off on spot purchases of raw material concentrate, betting they can charge higher processing fees on imports once Freeport-McMoRan Inc resumes exports from Indonesia, sources at smelters and traders said.

Indonesia said on Friday it expects to sign a memorandum of understanding with U.S. miner Freeport on Friday that would allow it to ship 756,000 tonnes of copper concentrate in the second half of the year. A resumption of the exports has been anticipated by the copper market.

Chinese smelters, the world's biggest importers of copper concentrate, buy up to half of their requirements in the spot market, and a postponement of purchases will force trading houses and other sellers to find alternative buyers.

The sellers will also have to fork out more to the smelters in spot processing fees once Freeport's concentrates from Indonesia hit the market.

Sellers of concentrate pay treatment and refining charges (TC/RCs) to the smelters to convert the raw material into refined metal, with the charges deducted from the smelters' sale prices. The charges rise or fall in line with concentrate supply.

"Freeport's resuming exports would have a big impact. TC/RCs could jump to $110/11 cents immediately after the Freeport restarting," said an executive at a state-backed copper smelter in China, who declined to be named because he was not authorised to talk to media.

The executive said his firm was going to put purchase of spot concentrate on hold while waiting for Freeport's exports from Indonesia to resume. It was not immediately clear when the exports would restart.

A trading manager at a large state-owned smelter also expects spot TC/RCs to rise to about $110 per tonne and 11 cents per pound shortly after Freeport's restarting. Those levels of the processing fees were last seen in March.


Chinese smelters had already started reducing purchases of spot concentrate since late May, betting on Freeport resuming exports in the third quarter and on a rise in TC/RCs. But TC/RCs have continued to fall since then because of strong spot buying by other Asian smelters, traders and the smelter sources said.

Sellers this week offered to pay TC/RCs of $84-$90 per tonne and 8.4-9 cents per pound for spot standard, clean copper concentrates to China, compared to around $100 and 10 cents in late May.

The offers were also lower than the $95.5 and 9.55 cents paid by Anglo-Australian miner BHP Billiton to at least one large Chinese smelter for term concentrate shipments in the second half of 2014.

The trading manager at the large state-owned smelter said the firm was likely to buy two to three shipments of spot concentrate imports if TC/RCs rose to $100-$110 and 10-11 cents.

China's copper concentrate imports (CU-CNCONIMP) surged 47 percent on-year to nearly 1 million tonnes in June, the third-highest monthly number ever.

The jump in June imports was due to increased arrivals of term shipments, the smelter sources said.

(Editing by Muralikumar Anantharaman)