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European copper premiums climbing on outages, strikes

Keywords: Tags  copper premiums, Rotterdam, LME, London Metal Exchange, copper prices, copper scrap, Comex, Metal Bulletin Mark Burton

LONDON — Copper premiums have been quoted as high as $120 per tonne in Rotterdam, Netherlands, this week as the European market experiences tighter supply following port strikes in Chile and a maintenance shutdown at Swedish miner Boliden AB that began in early April.

The recent slump in copper prices on the London Metal Exchange has also tightened the supply of scrap and increased demand for cathodes as a replacement, market sources told AMM sister publication Metal Bulletin.

Metal Bulletin’s Rotterdam in-warehouse copper premiums stood at $90 to $120 per tonne April 30, up from $65 to $100 at the start of April, as market sources reported a flurry of inquiries for cathodes to cover shortfalls arising from a three-week Chilean port strike that ended April 6.

Corporación Nacional del Cobre de Chile (Codelco) said shipments of about 60,000 tonnes of cathodes were delayed during the strike, while Anglo American Plc said 10,000 tonnes of its material was affected.

The short-term strain in availability has been compounded by extensive maintenance shutdowns at Boliden’s copper and zinc smelters since the start of April.

The most extensive work is being undertaken at the Rönnskär copper smelter in Sweden, which averaged nearly 18,000 tonnes per month of cathode production last year.

The outages will negatively affect operating profit to the tune of about 300 million kronor ($46.3 million), Boliden said in its annual report in February.

The group is expected to provide a further update May 3, when it releases its first-quarter production figures.

"We definitely have a shortage in the market these days," a source at a copper producer told Metal Bulletin.

The recent flow of material into LME warehouses in Antwerp has also concentrated the availability of the surplus material that was entering the market prior to the port strikes and shutdowns, he added.

There were 122,575 tonnes of copper stored in Antwerp, Belgium, warehouses April 30, about 87 percent of the total available in European LME sheds.

Warehouses helped to boost premiums in the first quarter as they offered incentives of up to $100 to bring copper into storage in Antwerp, but consumers are now outbidding them to secure material through the unexpected shortfall, sources said.

The same trend has been seen in Asia and the United States to varying degrees, following a court-ordered shutdown at Sterlite Industries India Ltd.’s Tuticorin smelter in India and a wall collapse at Kennecott Utah Copper LLC’s Bingham Canyon Mine.

"We’ve had inquiries from all over, but we’ve got no availability. It’s down to the strikes and the shutdowns, the lack of cathodes due to the queues and the lack of scrap," a second producer said.

The availability of scrap has tightened since the 11-percent drop in prices seen earlier in April, leading to narrower discounts on the material that is available. In some cases, No. 1 copper scrap has been sold on an LME-plus basis in Europe, he said.

"I wouldn’t consider that a benchmark, because it’s only small tonnages and it’s a marginal cost for the buyers, but the market for No 1 in particular has become really tight," he said.

Immediately following the swing in copper prices in April, there were reports that No. 1 copper scrap had traded at a premium in the United States.

At the time, Aurubis AG chief executive officer Peter Willbrandt told Metal Bulletin that discounts were narrowing in Europe, but it was unlikely that the market would be bid so aggressively.

In addition to tighter supply caused by the slump in prices, consumers of high-grade scrap are also facing stiffer competition from China as a result of restrictions on the import of lower grades, a source at a large scrap dealer told Metal Bulletin.

No. 1 scrap is trading flat to or at a premium over Comex and the LME, while No. 2 grades are selling at a 5-percent discount, he said.

The drop in prices has not triggered significantly stronger buying interest from consumers in Europe, where buyers continue to run inventories as thinly as possible and avoid taking strategic positions in response to lower prices, the first producer source said.

A version of this article was first published by AMM sister publication Metal Bulletin.

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