NEW YORK Low copper cathode spot premiums have
encouraged consumers to consider renegotiating their 2013
contracts, sources said.
AMMs spot copper premiums decreased to 4.5 to
5.5 cents per pound on Feb. 12 from 5 to 6 cents previously.
One consumer told AMM that he locked in 2013
contracted material at higher numbers than those available in
the spot market currently, putting spot material at a premium
of 5 cents per pound.
Were seeing some pretty low premiums, and the metal
weve locked in on annual (contracts) is higher than
whats on offer for spot, the consumer said.
So were looking for opportunities to buy some spot
and get out of our contracts, or at least decrease the
quantities. If theres cheaper (metal) out there, why buy
the expensive material?
Legally, the seller with whom the consumer signed the contract
must agree to any changes. Were working on
it, the consumer said. Were looking to pick
up a bit (of spot) in the second quarter.
Contracts allow for consumers to adjust the amount of metal
they take each month, and a second consumer told AMM that
hes also considering taking less material on contract in
favor of buying spot. However, renegotiating or canceling
contracts is difficult, he noted.
A third consumer recalled successfully renegotiating a contract
just once (about) eight to 10 years ago, and added
that hes not considering trying again this year, as his
contracts are reasonably in line with the spot market.
Copper premiums could rise over the next few months,
particularly if scrap remains tight and more consumers enter
the cathode market, the third consumer said.
I havent seen any price changes related to cathode
premiums so far. But if Im going to the market (because
of scrap tightness), I suspect other (consumers) will go to the
market, and that activity will raise premiums, the third
In addition, warehouse financing deals are keeping some supply
off the market, which could also move premiums north, sources
Theres been a significant amount of tonnage
delivered into the warehouses recently, and Im not sure
what the availability will be like. I think there will be a
squeeze, the third consumer said.
The week of March 11, 10,700 tonnes of copper was delivered
into LME-registered warehouses in New Orleans. Queues for
delivery out of these warehouses have stretched out until the
summer of 2014 as the large volume of zinc held there, over
760,000 tonnes, creates a bottleneck.
The warehousing situation could prove troublesome in spring, a
period when demand for copper traditionally increases, sources
Im ... concerned about the warehouses, the
third consumer said. Historically, demand picks up in the
spring. Bottom line, when it warms up, people are out
installing more copper.
Premiums could rise if copper supply can not meet higher
demand, he said.
Still, traders said that markets will only feel a squeeze only
if demand picks up, and that just hasnt happened yet.
Demand is pretty dormant, one trader said.
Theres a couple of truckloads here and there, but
nothing to write home about.