* Japan to aim for 2010 TC/RCs at $50/5.0 cts-$75/7.5 cts
* Some 1.8 million tonnes of concentrate at stake in wage talks
* Low output could slow Japan's nascent economic recovery
By Miho Yoshikawa
TOKYO, Oct 13 (Reuters) - Japanese smelters shortly begin negotiations on 2010 copper processing fees worried that a series of wage talks at top supplier Chile could threaten shipments, giving miners grounds to cut fees to new lows.
Those talks traditionally kick off during the annual London Metal Exchange week, which started on Oct. 12, in a period known as the mating season -- when producers and consumers get together to hammer out deals.
A cut in treatment and refining charges (TC/RCs), the fees paid by miners to copper smelters to refine ore into metal and are a key part of copper refiners' income, could force Japanese smelters to reduce output.
"Year-end talks for copper will soon be starting, but there is nothing good going for us and I am feeling a little blue at the thought of flying (to London)," Masanori Okada, the head of the Japan Mining Industry Association, recently said at a news conference.
The talks come against the backdrop of falling spot TC/RCs. Europe's biggest copper smelter, Aurubis, said last month that spot fees have tumbled to below $20 a tone and 2 cents a pound, down over 30 percent from a month earlier.
Okada said he was particularly concerned that negotiations to discuss the 2010 copper processing fees will be overshadowed by labour talks in Chile.
Copper prices, now trading around $6,300 a tonne, have doubled this year, emboldening mining workers around the world to demand a bigger share of the profits.
TOP MINES
Seven other top mines in Chile will begin talks this year, producing some 1.8 million tonnes of copper concentrate, according to data provided by the Japanese association.
"Not only will strikes at (large) scale mines like these tighten already tight supplies of ore ... they could even force us to cut production," Okada said.
Chile provided about 40 percent, or about 2 million tonnes of the roughly 5 million tonnes of copper concentrate that Japan imported last year.
A Japanese industry source said: "Mine strikes are not uncommon and don't usually disrupt supplies for long-term customers (like Japan) ... but miners are likely to use them to negotiate TC/RCs to their advantage."
Workers at Chile's Spence copper mine will strike on Tuesday after they scrapped a contract deal from owner BHP Billiton.
The strike could be only a temporary defeat for BHP, which is likely to convince workers at the world's biggest mine, Chile's Escondida, to accept an early wage offer this week and avert a stoppage. Escondida produces around 5 percent of the world's copper.
For a factbox on wage talks planned at copper mines in Chile, click
For a graphic of copper concentrate imports by Japan and by top consumer China, click: http://graphics.thomsonreuters.com/109/JP_CPRCTIMP1009.gif
TC/RC
Some Asian copper industry officials are already predicting that the processing fees for calendar 2010 might fall below the $50 per tonne and 5.0 cents per pound set for mid-year contracts that started in July.
"Term TC/RCs could be somewhere around $40/$50 next year," a smelter official in China said. "A shortage is almost certain next year."
A senior official with a Japanese smelter said his company will aim for a level between $50/5.0 cents and the $75/7.5 cents set for calendar 2009.
"We cannot possibly manage on a level (below $50/5.0 cents) ...as business conditions are very difficult," he said.
While a TC/RC of $42.5/4.25 cents for the year from July 2008, was the lowest in terms of headline numbers since 1993, it was probably the lowest ever when price participation clauses are taken into account.
"You have to remember that by then the price participation clause was scrapped from contracts ... and smelters had nothing to fall back on," said the Japanese industry official.
A price participation clause, which allows the level of the payment to smelters to fluctuate with global copper prices, was dropped from contracts from 2007, he said.
For a factbox on Japan's TC/RC, click on
Some analysts held views that were a little more optimistic for smelters.
"Codelco's output data was pretty strong so I don't think TC/RCs will go that much lower," said ANZ's senior commodity analyst Mark Pervan, suggesting the most likely outcome was a rollover of the mid-year terms.
Low processing fees due to tight concentrate supply are already choking production at some Japanese smelters.
Tatsufumi Okoshi, a senior economist at Nomura Securities Co Ltd's commodities research department, said this was very troubling news for Japan.
"If smelters are unable to increase copper output, it could lead to higher product prices, reaching levels that could even hinder economic recovery," he said.
Yoshihiro Nishiyama, a director and executive officer at Pan Pacific Copper Co Ltd -- Japan's top copper smelter -- said the company could not produce more copper anode, even though demand was returning as it did not want to buy raw material on the spot market due to low TC/RCs.
"The (spot) TC/RCs we are now seeing are abnormal, and there are no smelters anywhere in this world that can cover their costs under current conditions," Nishiyama said. (Additional reporting by Nick Trevethan in SINGAPORE, Polly Yam in HONG KONG; editing by Sue Thomas)