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Sources say the aim was to agree "evergreen" three-year deals in
which the Chinese company would commit to buy 50,000 to 60,000
tonnes a year of copper for the period.
Under the arrangement, the three-year pact would be rolled over
annually, so from 2020 the deal would be extended to run for
three years until the end of 2022 and so on.
The deal with China Minmetals, part of Codelco's efforts to
secure longer term supply contracts, focuses on the quantity of
copper to be supplied, sources said.
Typically supply contracts are agreed annually for the next year
during what is known as "mating season" in October and November
when producers and customers agree quantities. Premiums are set
above the London Metal Exchange benchmark price.
"Codelco is looking to establish a base of bigger and long term
strategic customers worldwide and Asia is not an exception," one
of the sources told Reuters.
A Codelco official said the company did not comment on
negotiations with customers. A China Minmetals spokesman said
the company could not immediately comment.
"The relationship between Minmetals and Codelco has been there
for many years, the important thing is the three years and the
quantity," a copper industry source said.
Codelco, the world's largest copper miner, accounted for 1.734
million tonnes of global supplies last year, about 7 percent of
the total estimated at about 23 million tonnes. It has
historically been used as a benchmark for copper premiums.
Many companies are keen to lock in long-term supplies due to
expectations of shortages over coming years, created by a dearth
of new projects, deteriorating ore grade and healthy demand.
Sources say companies seeking to buy copper at the moment can
easily find sellers and any deficits in the short term would see
prices rise, which would see more scrap heading for the market
to close the gap.
However, a 25 percent duty on Chinese imports of U.S. copper
scrap imposed since from Aug. 23 has fuelled uncertainty about
supplies in China, the world's largest consumer of the metal
used widely in power and construction.
"These tariffs have the potential to create a lot of problems
for Chinese consumers. But it's not just the tariffs, some
companies just want to be sure they have supplies secured,"
another copper industry source said.
"People think you can't agree contracts without premiums, but
premiums can be agreed at a later time," the source added.
For 2019, Codelco has agreed some deals with premiums at $98 for
European customers. Some Chinese customers have agreed to pay
$88 a tonne and other Asian clients have agreed $83 a tonne.
Copper prices on the LME <CMCU3> at around $6,200 a tonne are
down more than 15 percent since early June, but up from the
14-month low of $5,773 a tonne hit on Aug. 15.
(Reporting by Pratima Desai; Additional reporting by Tom daly in
Beijing and Fabian Cambero in Santiago; Editing by Veronica
Brown and Edmund Blair)
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