LONDON The sharp rise in copper cathode stocks stored in London Metal Exchange warehouses in Antwerp, Belgium, reflects weaker demand in Europe this year, according to Aurubis AG chief executive officer Peter Willbrandt.
LME stocks have risen nearly 90 percent since the beginning of December to around 473,000 tonnes currently. Antwerp has become the second-largest store of copper in the LME network in that time, with stocks there rising nearly 100,000 tonnes.
"Stocks in warehouses in China are stable," Willbrandt said on the sidelines of the 26th International Copper Conference in Madrid sponsored by AMM sister publication Metal Bulletin. "What we have seen is an increase in stocks in Europe, and this is a reflection of the weak demand here."
Aurubis saw weak European copper demand in the first quarter of the year, although the Hamburg, Germany-based company expects consumption by the real estate, electrical and electronics sectors to grow modestly from those low levels. However, it believes that demand from the automotive sector will remain poor.
The company has not yet seen an increase in consumer buying since the unexpected stalemate in Italys elections pushed down copper prices. Nor is there any indication that the broad contango in the LME price curve is encouraging consumers to hold stock.
"We have no indication that along the value chain copper inventories have increased. They are still at a very low level, because the uncertainty has not changed. We have seen perhaps some restocking, but along the value chain the inventories are still very low," Willbrandt said.
The concentration of deliveries into LME warehouses in Antwerp has come as companies operating there have been able to offer market-beating incentives to attract metal on to warrant as a result of queues that guarantee returns on rent.
It remains to be seen whether the new load-out requirements that come into effect next month will mitigate the impact of queues for those who need to withdraw and consume metal, Willbrandt said. "The increase in stocks in Antwerp is reflecting the weak demand in Europe, and so long as the situation does not change then it doesnt have an effect on the market. But if the economy picks up again and it takes months to get it out, that could influence the copper market."
The growing overhang of cathode in the market has come as a result of a step-up in mine supply since the second half of 2012.
There are indications that cathode and concentrate markets could move further into surplus later in the year as several European smeltersincluding Aurubis; Madrid-based Atlantic Copper SA; Lubin, Poland-based KGHM Polska Miedź SA; and Stockholm-based Boliden ABall start maintenance shutdowns.
"If you sum up all the shutdowns, that will be a large amount of concentrates that will not be treated as they normally are," Willbrandt said.
The spot market for concentrates has loosened further since the settlement of annual benchmark contracts, which have been agreed at treatment and refining charges of $70 per dry tonne, or 7 cents per pound.
Aurubis has recently been able to secure spot terms greater than $80 per dry tonne, or 8 cents per pound, and Willbrandt expects terms to move further in favor of custom smelters in the months ahead.
A version of this article was first published by AMM sister publication Metal Bulletin.