“Strikes are continuing and now we are considering an escalation,” said Stephen Smyth, president of the Construction, Forestry, Mining and Energy Union’s mining and energy division in Queensland, in a phone interview. Strikes that disrupted operations at the three BHP Billiton Mitsubishi Alliance mines yesterday will continue until at least Sept. 13, Smyth said. The action may be extended to BMA’s four other mines, pending a member vote later this week, he said.

About 3,500 coal miners have taken part in rolling work stoppages that began in June, the first in a decade at BHP’s Australian coal mines. The Melbourne-based company said it will allow all workers at the mines to vote on its proposal at a meeting at the end of September.

“We have reached an impasse in negotiations,” after a meeting with unionists yesterday failed to reach an agreement, BHP spokeswoman Samantha Stevens said in an e-mailed statement today. “We are keen for employees to take the time in the coming weeks to review and understand the agreement in detail, before the end-of-September ballot.”

Labor unions globally are stepping up demands for higher wages and improved conditions as surging commodity prices swell profits at mining companies including BHP. About 1,200 workers at Freeport-McMoRan Copper & Gold Inc. (FCX)’s Peruvian copper mine this week began the first of a series of strikes planned over pay increases.
Shipping Coal

BMA is equally owned by BHP and Mitsubishi Development Pty. It directly employs more than 4,800 people, according to its website. Almost all the coal mined at the BMA sites, with annual capacity of 58 million metric tons, is shipped overseas for steel production, it said.

A full-day strike may cut output by 130,000 metric tons a day from the mines, Melinda Moore, an analyst at Credit Suisse Group AG said in a June 27 report. She also said protracted strikes could sustain current price levels.

Steelmaking-coal prices rose 47 percent to a record $330 a metric ton for three-month contracts starting April 1 after heavy rain and flooding in Australia shut mines. In June, Asian steelmakers agreed to pay Anglo American Plc (AAL) $315 a ton for the September quarter, according to UBS AG.

The strikes have had a “modest impact” on production, BHP Chief Executive Officer Marius Kloppers said last month.

“BHP believes it’s negotiated enough and further talks won’t assist,” the CFMEU’s Smyth said today. “Negotiations should be alive and active. BHP is setting itself up to roll out an agreement that it will present to workers that the union doesn’t support in any shape or form.”

BHP closed 0.7 percent lower to A$37.91 in Sydney trading on Sept. 9. The shares have fallen 16 percent this year.

Inventories in bonded warehouses, which aren’t disclosed, may have dropped to about 300,000 metric tons, according to estimates from traders and analysts in China including Shanghai East Asia Futures Co. At the end of March, bonded warehouses held about 600,000 tons, according to Standard Bank Plc.

Increased shipments into China, which uses about 8 million tons of refined copper per year, or 40 percent of global demand, may spark a rebound in prices that have slumped from an all-time high in February. Goldman Sachs Group Inc. (GS) restated a call last week for a rally in copper to a record amid forecasts for a worldwide deficit as miners can’t produce the metal fast enough.

“Metal has been leaving the bonded warehouses at quite a steady pace because it is the peak-demand season,” said Jia Zheng, a trader at Shanghai East Asia. “China is still growing, which is keeping demand robust,” said Jia.

Three-month futures on the London Metal Exchange peaked at $10,190 per ton on Feb. 15, before tumbling in March, April and last month amid concern that global economic growth may be slowing, cutting demand. The metal, used in pipes and wires, traded at $9,153 per ton at 8:31 a.m. in Singapore.

Higher prices would benefit Phoenix, Arizona-based Freeport-McMoRan Copper & Gold Inc. (FCX), Chile’s state-owned Codelco, and Australia’s BHP Billiton Ltd. (BHP), the top three producers last year, according to London-based researcher CRU.

Industrial Production

China’s policy makers have been raising interest rates and ordering banks to set aside more cash to curb inflation that rose 5.5 percent in May, the fastest pace since 2008. Data this week also showed industrial production gained 13.3 percent in May, faster than forecast. The World Bank predicts China’s economy to expand 9.3 percent in 2011.

“Demand has definitely picked up,” said Che Hongyun, deputy director of research at Galaxy Futures Co., who also estimated that holdings in bonded warehouses have dropped to about 300,000 tons over the past two months.

Bonded warehouses are used to store shipments before duties are paid. The amount of copper held in separate stockpiles and tallied by the Shanghai Futures Exchange, which is disclosed weekly, fell 53 percent from this year’s high on March 17 to 83,275 tons last week.
‘Drew Massively’

Demand in China last month “was likely being met largely out of inventory, which drew massively,” Goldman analysts Allison Nathan and Jeffrey Currie wrote in a June 10 report. The report stuck with a 12-month price forecast of $11,000.

Copper stored in bonded warehouses has fallen about 150,000 tons in the past two months, Macquarie Group Ltd. (MQG) said in a June 6 report. The bank had estimated the stockpiles were 550,000 tons on April 18.

Barclays Capital analyst Gayle Berry also said bonded holdings have dropped and forecast an increase in imports, according to a June 3 report. The Chinese market “is awakening from the destocking cycle that lasted nine months,” Barclays Capital analyst Nicholas Snowdon said on June 9.

Data yesterday from China’s statistics bureau showed copper-products output was 979,000 tons last month, 20 percent more than the same month a year ago. China’s imports of copper and copper products were 254,738 tons last month, 36 percent lower than a year earlier, according to data on June 13.
Higher Imports

The “latest numbers from China show that the country is drawing down its domestic inventories rapidly,” Tobias Merath, the Zurich-based head of global commodity research at Credit Suisse AG, wrote in a note yesterday. “China will have to step up its imports in the coming months.”

“Downstream demand is steady,” said Li Ye, an analyst at Minmetals Starfutures Co., referring to manufacturers that use copper to make products. “Traders have little problem finding buyers for metal once it leaves the warehouse.”

Near-term copper supplies in China have been more expensive than longer-dated contracts since April, suggesting increasing demand or tighter short-term availability. Spot copper in Shanghai’s Changjiang, the biggest cash market, was 850 yuan-a ton more than futures yesterday.

China’s copper imports have fallen as local output has risen and prices overseas have been more expensive, making imports unprofitable for traders who seek to exploit price gaps between markets. Refined-copper output in China hit a record 470,000 tons in March and was 439,000 tons in May.

Copper in London has traded at a premium to futures in China, falling 2.3 percent between April 1 and May 31 compared with the 3 percent drop in Shanghai, where prices include a 17 percent value-added tax. Copper for August delivery on the Shanghai Futures Exchange gained 0.8 percent to 67,700 yuan ($10,449) a ton yesterday.

The International Copper Study Group has forecast a 377,000-ton global shortage this year. High prices will last “a substantial amount of years” on demand from China, Diego Hernandez, Codelco’s chief executive officer, said June 8.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

The iron ore production touched 125.0 million metric tons over the year and 31.2 million tons in the fourth quarter, level with the third quarter.

Current quarter production was impacted by tie-in activities at Western Australia Iron Ore as Rapid Growth Project 4 continues to ramp up. Following demand related production adjustments, Samarco returned to full production during the year ended June 2010, delivering a record result for the operation.

For the 2010 financial year, 39% of Western Australia Iron Ore shipments on a wet metric tonne basis were priced on annually agreed terms, with the remainder sold on a shorter term basis. During the second half of the financial year, the old benchmark pricing system was substantially replaced by shorter term market based, landed pricing. Our expectation is that future Western Australia Iron Ore shipments will be priced on this basis.

“We’re not talking about different tax rates,” Ferguson told Australian Broadcasting Corp. radio today. There will be “generous transitional arrangements” for existing projects and “there will be a headline rate of 40 percent.”

Prime Minister Kevin Rudd has seen public support drop since announcing his proposed tax on the “super profits” of resource projects, a levy mining companies say will stall investment in an industry that in April accounted for 57 percent of the value of goods exported.

Australia, the world’s biggest shipper of coal and iron ore, announced the new tax on May 2 as part of an overhaul that includes a phased cut in company tax rates to 28 percent from 30 percent by mid-2014. Rudd’s government is holding talks with resources companies on the plan.

BHP Billiton Ltd., Rio Tinto Group and Xstrata Plc met with Ferguson today in Canberra.

“At present there is no formal acknowledgement from the government” that the mining industry’s tax concerns will be addressed, the three companies said in a joint statement after the talks. Ferguson wouldn’t comment on the meeting.

Consultation Process

The government says 80 companies agreed to join the consultation process that is led by a Treasury panel. A first report outlining the issues under discussion will be released next month and a final document late this year, according to the government. Legislation will be put to parliament in late 2011 if the Rudd government is re-elected at a national ballot due by April.

“Nothing has changed,” Treasurer Wayne Swan said in Canberra today. “We said that our bottom line was a 40 percent rate. We said there would be generous transitional provisions and we said we’d discuss the detail with the industry, and that’s precisely what we’re doing.”

State Resources Minister Paul Holloway in South Australia, home to BHP’s Olympic Dam where a A$20 billion ($17.3 billion) expansion is under review, has called for special consideration for the project. The mine has the largest deposit of uranium in the world, the fourth-largest copper reserve and Australia’s largest reserve of gold.

“The federal government gave us a good hearing and we’re waiting for them to come back to us,” Holloway said in an e- mail last week.

New Investments

Sydney-based miner and steelmaker OneSteel Ltd., Australia’s second-largest producer of the alloy, said on May 26 it wants the proposed levy to only apply to new investments.

“We’ll make sure, as the premier of South Australia has raised with me and as I have discussed for example with OneSteel, that we will take on board the special nature of their operations,” Ferguson said today.

Documents released when the proposed levy was announced said the consultation process will focus on the point at which profits are taxed. Companies are seeking answers how the levy will be applied to processed minerals and raw commodities.

“The issue of the taxing point is central to our considerations,” Ferguson said today without providing details.

In a letter to shareholders, BHP Chairman Jac Nasser said the government has failed to acknowledge problems with the proposed 40% tax on “super profits” and its impact on the mining industry.

Nasser said the tax rate should vary according to the mineral resource being mined and should be applied on the value of minerals alone, excluding infrastructure processing or other support activities.

“Substantive redesign of this proposed tax is necessary and, if this can’t address its fundamental failings, it should be abandoned,” he said.

“The company will pursue investments in overseas mines more aggressively to secure raw materials,” Chief Executive Officer Chung Joon Yang said at a shareholder meeting in Seoul. Posco may buy a stake in a coal mine in Mozambique, it said in documents prepared for the meeting, without details on costs.

Steelmakers globally are facing soaring costs, with analysts forecasting that suppliers of coal and iron ore may ask for as much as an 86 percent jump in prices this year. The global steel market has bottomed and will grow by 9.2 percent in 2010 as demand rebounds in the U.S., Europe and Japan, the World Steel Association said last October.

“Economies at home and abroad are on a recovery path now, but the outlook for a full recovery is uncertain,” Chung said today. “We expect competition among steelmakers to increase.”

Pohang, South Korea-based Posco, which has risen 68 percent in the past year, was unchanged at 530,000 won in Seoul trading today, compared with a 0.5 percent advance in the local benchmark Kospi.

Iron Ore Mine

To meet rising iron ore needs, Posco said it will buy as much as a 15 percent stake in the Roy Hill project in Australia. Last year, Posco bought a 16.7 percent stake in Jupiter Mines Ltd., it said today. The Korean steelmaker purchased a 10 percent stake in Macarthur Coal Ltd., the biggest exporter of pulverized coal, in 2008.

Posco is planning a record 9.3 trillion won ($8 billion) in capital spending for 2010, up from 4.9 trillion won in 2009.

BHP Billiton Ltd., the world’s largest exporter of coking coal, may raise prices to $240 a metric ton this year, up from $129 a ton a year ago, UBS AG said Feb. 18. Prices of iron ore may rise 40 percent this year, Moody’s Investors Service’s analyst Matthias Hellstern wrote in a Feb. 22 report.

Posco is planning $30 billion of overseas expansion in India, Indonesia and Vietnam to regain its spot as Asia’s largest steelmaker.

“We will go ahead with overseas mill plans in countries including India and Indonesia in order to strengthen the company’s status as a global player,” Chung said.

The value may rebound to 2006’s levels when $175 billion of deals were done, after halving to $60 billion last year, Ernst & Young’s Global Mining & Metals Leader Mike Elliot said in an interview. Deals peaked at $210 billion in 2007, according to a report by the consulting firm.

Mining companies such as Anglo American Plc and Vale SA sold a record amount of dollar bonds last year to bolster war chests for acquisitions, expansions and buybacks. China, the world’s largest metal consumer, may add to last year’s record $32 billion spending on resource acquisitions.

“Many mining and metals companies are looking for acquisitions to fast track supply pipelines, driven by confidence in ongoing underlying demand in China and India,” Elliot said. “We are seeing a lot larger lists of potential buyers than there are assets available.”

BHP Billiton Ltd., the world’s largest mining company, rose 0.8 percent to A$41.00 at 11:53 a.m. Sydney time on the Australian stock exchange and Rio Tinto Group, the third- largest, gained 1 percent to A$71.29.

China led acquisitions last year, accounting for 24 percent of all deals, compared with 18 percent a year earlier, Ernst & Young said in the report released today. There may be the same amount of interest from China this year, Elliot said.

“The Chinese have learned very quickly how to successfully do these deals,” he said.

Companies making acquisitions may use proceeds from bond sales as an alternative to bank financing, he said.

Final benchmark contract-price agreements for the year may still be settled first by Japanese mills and the ore producers, Hu said in a phone interview, without naming any of the mills. Some of the annual Chinese contracts start from Jan. 1, he said.

Talks to set 2010 benchmark prices have begun between mills and suppliers including BHP and Rio Tinto Group, the China Iron & Steel Association said this week. Baosteel Group Corp. and Rio have named new negotiators, signaling the mills and miners want to start afresh after failing to agree on prices last year.

The steelmakers were asked either to accept the provisional price gain, or indexed pricing, UC361.com’s Hu said. BHP said last month it sold 46 percent of its first-half ore cargoes from Western Australia through a mix of cash, quarterly and index pricing.

Wang Liqun, chief negotiator for Baosteel Group, which represents Chinese steelmakers in annual iron-ore talks, declined to comment. Shan Shanghua, general secretary of China Iron & Steel Association, couldn’t be reached by Bloomberg News. BHP spokesman Samantha Evans declined to comment when contacted by Bloomberg News.

The four-decade annual pricing system was fractured last year after Rio, BHP and Vale SA, who account for three-quarters of traded iron ore, refused to meet China’s demand to cut prices by more than 33 percent during the global recession.

Five Largest

China’s five largest steelmakers proposed to one of the world’s top three suppliers that they pay a provisional 40 percent more for contract iron ore than a year ago, UBS AG said today, citing a Platts report. An agreement may have been reached, said UBS, citing the Platts report.

A 40 percent gain in contract prices would see the price of Australian ore rise to about $84 a metric ton, from about $60 a ton. The cash price, including freight and insurance, was at $128.20 yesterday, according to The Steel Index.

Vale SA, the world’s biggest iron-ore producer, expects to win contract prices this year that reflect a soaring spot market as Chinese demand surges. The spot market is the best indicator of where contract prices are heading, BHP Chief Executive Officer Marius Kloppers said this week.

“We were left in no doubt that BHP would be looking for a 90 percent iron-ore price rise for a 12 month contract,” Goldman Sachs JBWere Pty analysts, led by Neil Goodwill, said Feb. 10.

China’s monthly iron-ore imports fell 25 percent to 46.6 million tons in January, the second-lowest since January 2009, according to the general customs data, signaling slowing demand.

The slowdown in iron-ore shipments could be repeated this month because of the Lunar New Year holiday, which runs through next week, Goldman Sachs JBWere said in a Feb. 10 report. “Evidence of lower import demand could strengthen China’s negotiation position” for 2010 benchmark prices,” it said.

Final benchmark contract-price agreements for the year may still be settled first by Japanese mills and the ore producers, Hu said in a phone interview, without naming any of the mills. Some of the annual Chinese contracts start from Jan. 1, he said.

Talks to set 2010 benchmark prices have begun between mills and suppliers including BHP and Rio Tinto Group, the China Iron & Steel Association said this week. Baosteel Group Corp. and Rio have named new negotiators, signaling the mills and miners want to start afresh after failing to agree on prices last year.

The steelmakers were asked either to accept the provisional price gain, or indexed pricing, UC361.com’s Hu said. BHP said last month it sold 46% of its first-half ore cargoes from Western Australia through a mix of cash, quarterly and index pricing.

Wang Liqun, chief negotiator for Baosteel Group, which represents Chinese steelmakers in annual iron-ore talks, declined to comment. Shan Shanghua, general secretary of China Iron & Steel Association, couldn’t be reached by Bloomberg News. BHP spokesman Samantha Evans declined to comment when contacted by Bloomberg News.

The four-decade annual pricing system was fractured last year after Rio, BHP and Vale SA, who account for three-quarters of traded iron ore, refused to meet China’s demand to cut prices by more than 33% during the global recession.

Five largest

China’s five largest steelmakers proposed to one of the world’s top three suppliers that they pay a provisional 40% more for contract iron ore than a year ago, UBS AG said today, citing a Platts report. An agreement may have been reached, said UBS, citing the Platts report.

A 40% gain in contract prices would see the price of Australian ore rise to about $84 a metric ton, from about $60 a ton. The cash price, including freight and insurance, was at $128.20 yesterday, according to The Steel Index.

Vale SA, the world’s biggest iron-ore producer, expects to win contract prices this year that reflect a soaring spot market as Chinese demand surges. The spot market is the best indicator of where contract prices are heading, BHP Chief Executive Officer Marius Kloppers said this week.

“We were left in no doubt that BHP would be looking for a 90% iron-ore price rise for a 12 month contract,” Goldman Sachs JBWere Pty analysts, led by Neil Goodwill, said Feb. 10.

China’s monthly iron-ore imports fell 25% to 46.6 million tons in January, the second-lowest since January 2009, according to the general customs data, signaling slowing demand.

The slowdown in iron-ore shipments could be repeated this month because of the Lunar New Year holiday, which runs through next week, Goldman Sachs JBWere said in a Feb. 10 report. “Evidence of lower import demand could strengthen China’s negotiation position” for 2010 benchmark prices,” it said.

First Quantum Minerals Ltd hopes to get Western Australia’s troubled Ravensthorpe nickel mine up and operating within 18 months, after formally taking control of the site.

The Canadian copper miner took control of the mine on Wednesday, after receiving government approvals.

Over the next year the company will work on modifying the troubled plant and then spend about six months to commission and ramp-up the mine.

It expects the works to cost about $US150 million ($A171.47 million).

Ravensthorpe was controversially closed down by BHP Billiton Ltd (ASX:BHP) in January 2009, amid difficulties in exploiting the nickel laterite deposits and plunging prices of the metal.

The nickel mine cost about $US2.1 billion ($A2.4 billion) for BHP to build and when it closed 1,800 people lost their jobs, a huge economic blow to the town of Ravensthorpe.

The mine is located about 550 kilometres southeast of Perth, and First Quantum expects it will produce 39,000 tonnes of nickel each year for the first five years and 28,000 tonnes annually after that.

The mine’s expected life is 32 years.

Bruce McNally from the Ravensthorpe Hopetoun Media Liaison Group said working with First Quantum was in stark contrast to his dealings with BHP Billiton.

“Their (First Quantum’s) front people have a deep knowledge of the process and a very deep knowledge of how to make that plant a viable proposition,” Mr McNally said.

“BHP are a massive bureaucracy, far more complex than any government bureaucracy and therein lies their incompetence,” he said.

He said now that the mine was restarting he expected businesses that had shut their doors to return.

Kloppers offered a “relatively modest outlook” for shorter-term world economic growth, but also said that “longer-term demand outlook for the products that we produce in the minerals and metals and energy sectors continues to be robust.”

The Melbourne-based miner also declared a dividend of 42 cents a share, up 2.4% from 41 cents a year earlier.

The dividend of 42 cents was “roughly in line with expectations,” said Potter.

Myra P. Saefong is MarketWatch’s assistant global markets editor, based in Tokyo.
BHP said its revenue for the half year fell 17.5% to $24.58 billion from $29.78 billion.

Looking ahead, BHP said that with reduced capital investment in new mining capacity since 2007, “supply may struggle to keep pace with demand in the medium and longer term.”

That comment “will garner a lot of attention as it bodes well for higher sustainable commodity prices,” Ben Potter, a research analyst at IG Markets, said in a note to clients after the BHP results were released.

And the “fact that the result was driven by higher volumes as opposed to higher prices should please the market,” he said.

Shares of BHP Billiton added 1.6% in Sydney’s morning trading.
Demand recovery

The rally in commodity prices and demand was “driven by strong recoveries in China and India — and lately by [the] start of restocks in developed economies,” BHP’s Chief Executive Marius Kloppers said during a news conference, according to a transcript of his remarks.

In the six months ended Dec. 31, net profit for BHP (AU:BHP 40.34, +0.49, +1.23%)
(BHP 71.20, +0.04, +0.06%) , which is among the world’s largest mining companies, more
than doubled to $6.1 billion, or $1.103 a share, from $2.6 billion, or 47 cents a share, in the year-earlier period.

Excluding exceptional items related to the reversal of an impairment charge on the suspension of Ravensthorpe nickel operations, the miner saw net profit of $5.7 billion, down 7% from $6.1 billion from the same time a year earlier.

Still, the results beat out analysts’ consensus expectations for a profit of $5.1 billion to $5.3 billion, according to IG Markets.

“Record sales volumes in three key commodities delivered a sound financial performance,” BHP said in a statement. “However, lower commodity prices and a weak U.S. dollar adversely impacted earnings compared to the prior period.”

“When this year’s iron ore price talks started, Japanese and Korean steel mills agreed to a higher benchmark price for this year, so the key issue now becomes how much the price hike will be,” the report said, citing a mining source close to Rio Tinto and BHP Billiton Ltd.

Rio Tinto officials couldn’t immediately be reached for comment.

Chinese mills led by Baosteel Group Corp. are also holding price talks with the three global miners, the report quoted a purchasing manager at a state-owned iron ore trading house as saying.

“Baosteel has in principal agreed to the price hike, (and) they’re under much pressure in this year’s talk,” said the person.

Chinese steel mills, however, are unlikely to accept an increase of more than 30% from 2009 levels, the report quoted a person close to the negotiating parties as saying. “The (price hike) may be around 20% to 30% for this year,” he said.

According to an Australian mining source cited in the report, Japanese and Korean steel mills may be willing to accept a 40% hike this year although they haven’t formally accepted the offer.

The report quoted Shan Shanghua, chairman of the China Iron and Steel Association, as saying he had no knowledge of the development.

When contacted separately by Dow Jones Newswires, CISA Deputy Secretary General Qi Xiangdong also said he was unaware of any progress in talks.

“When this year’s iron ore price talks started, Japanese and Korean steel mills agreed to a higher benchmark price for this year, so the key issue now becomes how much the price hike will be,” the report said, citing a mining source close to Rio Tinto and BHP Billiton Ltd.

Rio Tinto officials couldn’t immediately be reached for comment.

Chinese mills led by Baosteel Group Corp. are also holding price talks with the three global miners, the report quoted a purchasing manager at a state-owned iron ore trading house as saying.

“Baosteel has in principal agreed to the price hike, (and) they’re under much pressure in this year’s talk,” said the person.

Chinese steel mills, however, are unlikely to accept an increase of more than 30% from 2009 levels, the report quoted a person close to the negotiating parties as saying. “The (price hike) may be around 20% to 30% for this year,” he said.

According to an Australian mining source cited in the report, Japanese and Korean steel mills may be willing to accept a 40% hike this year although they haven’t formally accepted the offer.

The report quoted Shan Shanghua, chairman of the China Iron and Steel Association, as saying he had no knowledge of the development.

When contacted separately by Dow Jones Newswires, CISA Deputy Secretary General Qi Xiangdong also said he was unaware of any progress in talks.

Seven Summits Strategic Investments’ PriceWatch Alerts are available at http://www.iotogo.com/s/012110C (Note: You may have to copy this link into your browser then press the [ENTER] key.)

Today’s PriceWatch Alerts cover the following stocks: Chevron Corp. (NYSE: CVX), BHP Billiton Ltd. (NYSE:BHP), FedEx Corporation (NYSE:FDX), Cephalon Inc. (NASDAQ:CEPH), and Legg Mason Inc. (NYSE:LM).

In today’s unsure markets these brief PriceWatch Alerts contain concise detailed strategies for each covered stock and include position protection tactics designed to potentially defend investors from unexpected market shifts. While other market reports only provide stock news and opinion, we offer strategies that position investments against uncertainty and increase chances of making a profit, even if a stock goes down.

“Our PriceWatch Alerts go beyond other market reports. Along with a brief concise overview, each PriceWatch Alert provides useful strategies, which ensure potential investments are protected with basic hedging techniques,” says Reid Stratton, Seven Summits Senior Analyst. “These brief company reports contain information that can benefit expert and novice investors who want to stay ahead of the market.”

The company will pay $46.50 a metric ton and 4.65 cents a pound in so-called treatment and refining charges, the two people said yesterday, declining to be identified as the agreements aren’t public. Bill Collier, a spokesman for Phoenix- based Freeport, declined to comment in an e-mail.

The agreements may set a benchmark for talks with smelters in China and India, which are yet to settle with suppliers. The fees for producing metal from semi-processed ore, known as concentrate, were lower than estimates and usually drop when there is a shortage as smelters compete for supplies.

“Chinese smelters can get a bit higher, perhaps around $50 as domestic supplies of copper ore and scrap are improving,” Zhou Qian, an analyst at Shanghai-based commodities researcher CBI China Co. said today. Zhou said Chinese smelters yet to re- start talks with mining companies.

Chinese output of copper concentrate gained 10 percent in the first 11 months to 948,000 tons in metal content, according to the National Bureau of Statistics. A Chinese smelter official who declined to be identified said negotiations were yet to re- start with suppliers.

Talks between Chinese smelter operators and overseas mining companies have stalled amid diverging price expectations, 21st Century Business Herald reported Dec. 21, citing Jiangxi Copper Co.

Price Difference

Overseas miners insisted on $43 a metric ton to have ore smelted whereas Chinese producers asked for $60, the newspaper said, citing Jiangxi Chief Financial Officer Gan Chengjiu. A call to the company today was not immediately answered.

Major smelters in Japan are still in talks with BHP Billiton Ltd., which owns the Escondida mine in Chile, to set 2010 fees, according to the two people. Escondida is the world’s biggest copper mine.

Next year’s fees from Japan are down from $75 a ton for smelting and 7.5 cents a pound for refining for 2009 and from $50 and 5 cents for midyear contracts started July. Midyear contracts typically cover less than 20 percent of the smelters’ needs, according to Atsushi Yamaguchi, a Tokyo-based analyst at UBS AG.

The global deficit of the raw material may rise fivefold to 1 million tons next year, Christine Meilton, an analyst at CRU, said Nov. 9. CRU had forecast the 2010 charges to be about or just less than $50 per ton and 5 cents per pound.

Concentrate Shortage

“The difference between the availability of concentrate and the smelting capacity is still growing and that will continue for the foreseeable future,” Eleni Joannides, copper research manager at London-based research company CRU, said yesterday by phone.

Freeport rose 49 cents to $78.45 in Dec. 22 New York Stock Exchange composite trading. The shares have more than tripled this year.

Copper in London has more than doubled this year as China’s imports rose to a record. The contract for delivery in three months gained 0.1 percent to $6,890 a ton on the London Metal Exchange at 11:28 a.m. in Shanghai.

Treatment fees are expressed in dollars per ton of concentrate received and refining fees in cents per pound of copper contained in the concentrate. The fees are deducted from the price paid by smelters to miners for the concentrate.

Smelter Profits

“Given current foreign exchange rate trends, copper prices and sulfuric acid prices, around 13 cents a pound may be the level at which the Japanese operators can remain profitable,” Yamaguchi said in a note on Nov. 6. The 13-cent-per-pound level is equivalent to $55 a ton and 5.5 cents a pound, he said.

The shortage of concentrate emerged after China expanded smelting capacity, CRU’s Joannides said. “If smelters don’t get enough concentrate, they will have to shut,” she said.

Pan Pacific Copper, Japan’s top copper smelter, is owned 66 percent by Nippon Mining & Metals Co., a unit of Nippon Mining Holdings Inc., and 34 percent by Mitsui Mining & Smelting Co. Sumitomo Metal Mining ranks second ahead of Mitsubishi Materials. Calls to the smelters weren’t answered as it is a national holiday in Japan today.

“There aren’t many profitable steelmakers at present,” Shanghai-based Baoshan told the official Xinhua News Agency in an interview posted on the company’s Web site. “A further rise in iron ore prices would cause more losses.”

Rising steel demand and prices in China, the largest producer, led Macquarie Securities Group to predict a 30 percent gain in iron ore prices next year. Baosteel’s comments underscore the differences to be bridged in annual price talks between steelmakers and the world’s three biggest iron ore suppliers BHP Billiton Ltd., Rio Tinto Group and Vale SA.

“There’s room for prices of raw materials to rise only when mills can pass on the cost pressures,” Baosteel said in the Xinhua interview. “The foundation of Chinese steelmakers’ profitability is not solid as the demand is largely created by the government’s stimulus policy amid a global crisis.”

China’s $586 billion stimulus spending has boosted steel demand from automakers, home-appliance manufacturers and builders. That’s fueled record imports of iron ore, used to make steel, this year. Baoshan Steel raised benchmark steel prices by 8 percent for January delivery, the first increase since September, on Dec. 10.

Ship Plates

“Demand from the auto and appliance industries has been strong since the second quarter,” Baoshan Steel said in the Xinhua story. “We can’t meet our clients’ needs even at full capacity.”

Still, the improving demand and prices for products needed by makers of cars and appliances have been offset by declines in other products, Baoshan Steel said. Ship plates are lossmaking, it said.

Baoshan Steel’s comments come as analysts including Deutsche Bank AG forecasts rising steel demand and as cash prices for iron soared. Steel price increases by Baoshan Steel and rivals signal demand growth in China will outpace supply expansion in 2010, Deutsche Bank said.

Weekly cash prices for iron ore imported by China from India gained 5.2 percent, the biggest gain in six straight weeks, to a record $111.5 a metric ton last week, according to Metal Bulletin. The cash price for Australian ore also reached a record $107.4 a ton as of Dec. 18, according to the Steel Index.

“Cash iron ore prices rose on bets that steel prices will rise over the long term,” said Zhu Limin, an analyst with Shanghai Securities Co.

“We have absolutely no plans to exit nickel,” a spokeswoman for the miner said.

The miner has sold its Ravensthorpe nickel laterite project and its Yabulu nickel refinery in Australia this year and has raised concerns about the emergence of nickel pig iron from China on prices.

* Sale of 40% stake marks BHP’s latest exit from nickel

* Stake bought by Philippine partner (Adds details)

MANILA/SYDNEY, Dec 22 (Reuters) – Global miner BHP Billiton Ltd/Plc (BHP.AX: Quote) (BLT.L: Quote) has pulled out of a $2 billion nickel project in the southern Philippines after selling its 40 percent stake to a local partner.

The project was BHP’s only mining venture in the Southeast Asian country and the move could be part of the miner’s plan to exit the nickel business as early as next year after selling two major nickel divisions in four months. [ID:nSGE5BF02J]

In a statement e-mailed to Reuters, BHP said it signed a sales agreement for the stake with Asiaticus Management Corp of the Philippines, which is controlled by Filipino businessman Peter Tan and already owns 60 percent of the undeveloped nickel mining and processing project in the southern Mindanao region.

BHP and Asiaticus had been at odds over when to start commercial production. Asiaticus pushed to begin as soon as possible, while BHP wanted to wait until 2015 at the earliest, Environment and Natural Resources Secretary Lito Atienza told Reuters in a telephone interview.

In 2007, the Philippine government announced that BHP would invest up to $2 billion in the country.