SANTIAGO, Oct 21 (Reuters) - The world's biggest copper miner, Codelco, has slashed its 2017 physical copper premium to European buyers to the $80 to $85 per tonne range and is offering Chinese buyers a premium of around $70, three traders told Reuters this week.
That would represent a deep cut from last year, underlining continued oversupply and demand weakness in the global copper market. Two of the sources said that Codelco would offer a premium of $82 to buyers in Europe.
Codelco's premiums, the delivery charge buyers use on the London Metal Exchange to secure physical copper, are viewed as a benchmark for global contracts, and other producers are likely to follow suit.
The state-run copper giant offered a Chinese premium of $98 and a European premium of $92 last year.
Last week, Aurubis, Europe's largest copper smelter, offered its clients a premium of $86, down from $92 the previous year.
Two of the traders said they believed Codelco this year will have less margin to offer premiums that are significantly higher than those that traders can obtain later in the year in the spot market.
One trader said that premium pricing would be tricky this year in South Korea and Taiwan, as premiums in those countries are typically tied to the European premium and are below the Chinese one. As the Chinese premium is below the European premium this year, the source said, that pricing framework will not work.
Treatment and refining charges, or TC/RCs, will be similar to last year or slightly lower, the traders said.
Codelco declined to comment. (Reporting by Fabian Cambero; Writing by Gram Slattery; Editing by Andrew Hay)