NEW YORK More than 11,000 tonnes of copper have been delivered into London Metal Exchange-listed warehouses in New Orleans this month as incentives from warehousing companies entice traders to use the market of last resort amid slow spot demand.
Some 11,600 tonnes of copper have entered the citys LME-registered warehouses since Jan. 31, with just 50 tonnes shipped out. New Orleans copper stocks stood at 111,075 tonnes and canceled warrants totaled 3,075 tonnes Feb. 8 vs. stocks of 75,775 tonnes and cancelled warrants of 13,550 tonnes Jan. 2.
The most recent spate of deliveries has been attributed to traders shifting Chilean copper into warehouses.
"Its all from Chile," one trader told AMM. "If you have warehouses willing to pay you an incentive and that incentive is enough that you wont lose money, you might as well put it in there."
"Chances are high that it came from Chile. Shipments from Chile will continue since world copper markets suck at the moment," a second trader said.
Warehousing firms have been offering incentives to get metal into their stores in New Orleans since last year (amm.com, Oct. 8). Incentives are about $100 per tonne but can go as high as $120 per tonne for larger volumes, AMM understands.
"The top Ive heard is $120, but it has to be 5,000 tonnes or more to get that kind of incentive," the first trader said.
Storing the metal doesnt pay handsomely but it is still worthwhile for sellers, given weak copper demand.
"Warehouses are offering very attractive premiums. ... And its cash in hand. You dont have to wait for payment," a third trader said.
Queues to get material out of New Orleans warehouses are out to about a year due to a build up of zinc inventories, but traders said they are not concerned about a potential copper supply shortage should demand pick up.
"Most domestic consumers have long-term contracts covered, so its going to be quiet for a month or two. Maybe (demand) will come back in March, but I dont think it will have much of an impact," the third trader said.
Traders and producers would rather sell directly to consumers instead of putting material in warehouses, but theres just nothing happening at the moment, a fourth trader said. "At the end of the day, Comex is high. It (would be) preferable to sell (to consumers) over warehouses. But there really hasnt been that much consumer buying. Theres been some light improvements in the economywire business seems to be improving slightly, but its nothing significant enough to warrant an uptick in buying."
Comex prices are high, settling at $3.7595 per pound Feb. 8.
CWT Commodities Pte Ltd., JPMorgan Chase & Cos Henry Bath division, Metro International Trade Services LLC, Noble Metal LLCs Worldwide Warehouse Solutions Group, Pacorini Metals USA and Trafigura Ltd. all operate LME-approved warehouses in New Orleans.
Barbara ODonovan, New York, contributed to this story.