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Copper cathode premiums decrease

Keywords: Tags  copper, copper cathode, copper premiums, copper prices, Chinese New Year, London Metal Exchange, LME, warehouse stocks building wire


NEW YORK — Lethargic copper cathode demand pushed AMM’s spot premiums lower Feb. 12.

Free-market copper cathode premiums dipped to 4.5 to 5.5 cents per pound from 5 to 6 cents previously, the first time premiums fell to this range since early March 2012.

"Premiums are pretty low," according to one consumer, who bought a small spot load at a premium that was below 5 cents.

Spot demand for copper cathode, which has already been quiet so far in 2013, has been particularly low due the Chinese New Year holiday, which began Feb. 10.

"That’s over 40 percent of the market out of the market," a second consumer told AMM.

"With China shutting down for two weeks, it’s kind of boring," a trader added.

"China is slow. We haven’t really done any spot," a second trader agreed, pegging premiums at 5 to 5.5 cents per pound.

The second consumer purchased 500 tonnes of cathode in the past week at a premium of less than 5 cents. This cathode will be used in the building wire end-markets, an area that participants are forecasting will increase slightly this year.

"The wire business seems to be improving slightly," a third trader said. "But it’s nothing significant enough to warrant an uptick in buying (yet). In terms of consumer buying, there really hasn’t been that much. Our spot business is slow."

Most consumers are meeting their needs with material bought on contract, although some traders are optimistic that spot business could pick up later this year as less material was contracted for 2013 than in 2012.

"Most domestic consumers have long-term contracts covered, so it will be quiet for a month or two," the second trader said.

The third trader agreed, but added that many consumers "left a big chunk" of business open for the spot market this year.

This hasn’t happened yet, however, leaving traders with little choice other than to deliver metal into London Metal Exchange-registered warehouses.

More than 11,000 tonnes of copper has been shipped into LME-registered warehouses in New Orleans since the start of February, LME data shows. Total copper inventories in New Orleans stood at 112,050 tonnes Feb. 12 compared with 75,775 tonnes Jan. 2.

Delivering the metal into the warehouses might not be as lucrative as selling to consumers, but in the absence of spot demand incentives being paid by some warehousing companies is enough to entice traders to continue to ship copper into the warehouses (amm.com, Feb. 8).

The trend will continue as long as demand is lackluster, traders said.

Traders were surprised at the strength of copper prices on the LME given the absence of the Chinese market.

The Comex March copper contract, the most actively traded, settled at $3.744 per pound Feb. 12, up 0.6 percent from $3.7225 Feb. 11. Three-month copper on the LME ended the official session at $8,220 per tonne Feb. 12, down 0.5 percent from $8,258 per tonne Feb. 11 but up 0.4 percent from $8,190 per tonne Feb. 1.


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