US miner Freeport-McMoRan Copper & Gold has agreed to pay 16.3 per cent more in annual processing charges to large Chinese copper smelters in 2015, with the 10-year high fee likely to set the benchmark for China.

The increase in charges is a clear signal that even miners accept copper will swing into surplus next year after five years of deficit. Expectations of swelling supply have hung over copper prices, which have fallen about 12 per cent this year.

Higher charges usually spur smelters to boost production, which would ease supply constraints in China and the rest of the world if smelters also ramp up exports.

China's top integrated copper producer, Jiangxi Copper Company and other large Chinese smelters have agreed with Freeport to term treatment and refining charges of $107 per tonne and 10.7 cents per pound for copper concentrate shipments in 2015, three sources who have direct knowledge of the matter said on Wednesday.

That is up from $92 per tonne and 9.2 cents per pound for term shipments in 2014, which were 31 per cent higher than for shipments in 2013.

The 2015 charges, the highest since 2005, are for clean, standard copper concentrates to China.
Freeport, which runs the world's second-biggest copper mine in Indonesia, did not immediately respond to an email seeking comment on the charges.

The agreed TC/RC were in line with the expected $100-$110 and 10-11 cents but lower than $110-$120 and 11-12 cents in the spot market in Asia this month.

Miners pay TC/RCs to smelters to convert concentrate into refined metal, with charges deducted from the smelters' purchase prices. As the supply of concentrate increases, the demand for smelting capacity and the charges also rise, translating into higher profits for smelters.

Mine output is estimated to rise more than 8 percent in 2015, according to Reuters data.

"Other global miners should follow that TC/RC, which would be the benchmark for China," one source from a large state-owned smelter said.

Freeport and Chinese smelters started talks on TC/RCs last month and reached the agreement on Tuesday, according to a second source.

Jiangxi Copper had originally sought $110 and 11 cents, while Freeport's opening offer was $100 and 10 cents, the second source said.

Chinese smelters would continue to hold talks with other miners, including BHP, this month, a third source said.-Reuters