LONDON, Oct 26 (Reuters) - Indonesia's bid to add value to its mineral exports will dilute copper miner Freeport's benchmark status for annual contracts as its 2024 sales will fall short of levels needed for a global reference, three sources with direct knowledge of the matter said.

As one of the world's largest copper miners, producing two million metric tons annually, treatment and refining charges (TC/RCs) Freeport agrees with Chinese smelters has for years been used as a basis for contracts worldwide.

Without the consensus benchmark TC/RCs for processing concentrate many miners, traders and smelters may have to negotiate their own contracts or use the spot market which is much more volatile.

Other than Freeport's TC/RCs, the numbers negotiated by other major copper miners could be used in industry contracts, but this split will cause unprecedented opposition from Chinese smelters that consume nearly half of global copper concentrate supplies.

The copper benchmark TC/RCs structure has been in place for the past 30 years. TC/RCs fall when concentrate supplies are tight and undermine copper smelters' profit margins.

To comply with Indonesia's push to process concentrate locally into metal, Freeport is building the Manyar smelter which is due to be completed by May next year.

The feedstock for Manyar will come from Freeport's Grasberg mine in Indonesia, the world's second largest active copper mine. Grasberg produces 688,400 tons copper or roughly 4% of global mined copper supply.

"If Freeport is going to sell Grasberg's material for only five months next year, they should not be seen as a benchmark," a source at a major mining company said.

Export permits for Grasberg expire in May next year when its Manyar smelter should be operational. Sources say Freeport needs to show the Indonesian government it has reserved raw material for the smelter.

"It is not easy to determine the amount of Grasberg that is available for export beyond May 2024. The amount will reduce gradually as the new smelter ramps up," said Javier Targetta, senior vice president for Freeport's copper concentrates marketing and sales.

"Freeport has not been officially appointed as the benchmark negotiator, it is called benchmark only when other miners and smelters agreed to use it. If other miners can agree on separate numbers, then there will be other references."

Manyar is expected to treat up to two million tons of concentrates annually. It may take up to six months to reach capacity.

Delays to the construction of Manyar meant 1.7 million tons of Grasberg's concentrate will be exported between July 2023 and May 2024 under a licence which carries a 7.5% export penalty.

Freeport is negotiating with Indonesia for its export license to sell concentrate from Grasberg from May 2024, five sources with knowledge said.

"The export license is through May," said Freeport President Kathleen Quirk at a recent briefing. "We've still got to work with the government to work through this issue beyond May of having a ramp-up period."

(Reporting by Julian Luk and Pratima Desai; additional reporting by Ernest Scheyder; editing by Veronica Brown and Susan Fenton)