Chile's Codelco cut the premium for selling copper to its biggest Chinese clients by 36% for next year and is trying to fix it in a way that would guarantee its revenues, three sources with knowledge of the matter said this week.

Codelco, the world's largest copper producer, has offered to sell copper at a premium of $89 a metric ton to major Chinese clients for its 2024 contracts, down from this year's $140 a ton, the sources said.

Reuters reported last month that China's largest copper buyers expect to pay a premium of around $90 per metric ton next year for State-owned Codelco's metal.

The premiums set by Codelco for physical delivery of copper are paid on top of London Metal Exchange (LME) prices and are sometimes used as a benchmark for global contracts for the metal used in the power and construction industries.

China is the world's largest consumer of copper used widely in the power and construction industries, accounting for half of global demand estimated at 26 million tons this year. Codelco sells 40% to 45% of its copper to China.

The sources said this is the first time in six years that Codelco is attempting to lock in a fixed premium for all of the copper it sells to China next year.

"We will not comment on this topic for now," Codelco said in response to a request for comment.

Previously Codelco allowed a sizeable portion, sometimes up to 50% of contractual supply, to be priced on a "floating premium" linked to spot data provided by pricing agency Fastmarkets.

In its latest offer to Chinese clients, Codelco has removed the floating option, anticipating a softer spot premium for next year that may squeeze its profit margins, sources said.

International Copper Study Group (ICSG) forecasts a surplus of 467 000 metric tons for 2024.

Spot copper premiums are an indicator of the strength of physical demand. It has averaged around $50 a ton so far this year.

"The single premium of $89 is too high. If Codelco gave us an offer that is low enough, we may find it acceptable to cut the floating volume," a second source said.

Earlier in October, Reuters reported that China's largest copper buyers expect to pay a premium of around $90 per metric ton next year for state-owned Codelco's metal from $140 a ton this year.