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
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
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.