Nacional del Cobre de Chile (Codelco) has lowered its benchmark
European copper premium to $85 per tonne, a $5 cut from last
years terms, sources told AMM sister publication
The lower premium comes as
copper consumers experience weaker physical demand in Europe
and a lack of visibility in forward orders further down the
supply chain, sources said.
Codelcos 2013 price came
soon after Hamburg, Germany-based Aurubis AG offered its
European customers a rollover of its $86-per-tonne ex-works
premium in the run-up to mating season negotiations during
London Metal Exchange week.
Aurubis had cut its premium by
$4 a tonne in June and has seen no turnaround in consumer
demand since then, chief executive officer Peter Willbrandt
recently told Metal Bulletin.
But while copper producers have
made concessions to hard-pressed consumers, incentives offered
by warehouse owners have created a safety net under premiums,
"Its better than an
increase, obviously, but given the problems people have
building their budget and order books for next year, the
premium really should be lower," one European consumer said.
"But if you look at the incentives offered by warehouses, you
can see why premiums havent fallen more. In my mind,
its a clear distortion of the market."
London-based BHP Billiton Plc
has offered customers monthly, quarterly and annual fixed
contracts linked to prevailing spot premiums this year, sources
outside the company said.
"Theres a rift between
producers who want long-term deals and consumers who want
short-term," a physical trader said. "BHP is offering consumers
what they want."
"It reduces risk on premium
volatility, but youre also taking less return on the
premium because youll be exposed to higher numbers if the
market bounces back," a source at a Chinese smelter said. "It
depends on your approach."
Codelco executives are now set
to travel to Asia to discuss a benchmark premium with consumers
there. Last year, it secured a $110 premium, but there are
broad expectations that the 2013 number will be lower,
responding to the weaker spot market.
The Santiago, Chile-based miner
could give up $5 to $10 on the Asian benchmark, the Chinese
smelter source predicted, while others argued that it needs to
fall more substantially.
"In Europe, the Codelco
benchmark does respond to spot prices, but the numbers that
have been thrown around for Asia are a bit of a farce," the
"I think it will settle at $95,
but thats not a number thats actually trading. If
they actually want to book any volume, they should be taking
$75," he added.
Although the benchmark has been
settled in Europe, Codelco has yet to discuss finer details
such as volumes, the consumer said.
Codelco and BHP Billiton declined to comment.