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Copper premiums expected to rise in July

Keywords: Tags  Copper cathode, premiums, kennecott, lme warehouses, Bingham Canyon, Everdeen Mason


NEW YORK — Copper cathode traders and consumers expect spot market premiums to rise in July, when supplies could tighten, after holding steady in recent weeks.

AMM’s delivered premiums remained at 7 to 9 cents per pound June 26 as the market continued to move slowly. However, market participants said delayed market reaction to Kennecott Utah Copper’s declaration of force majeure following a wall slide at its Bingham Canyon Mine (amm.com, May 21) and long queues at London Metal Exchange-listed warehouses will cause delivery premiums to rise.

"Business is a little on the slow side but higher premiums could happen," a trader told AMM. "I’m down a little because of some recent activity but as some of the domestic producers run out, like Kennecott, supply will tighten."

The effect of Kennecott’s outage likely will not be seen until the end of July, sources said. "They’ve been expecting (higher premiums) since April since Kennecott’s wall slide," a second trader said.

Two sources said Kennecott will be able to make its July contractual deliveries, but the company would not comment.

"I was last told ... that Kennecott would have a plan by September," a copper buyer said. "If they did all of a sudden get material for July, we’re already booked. We had no choice but to buy material from overseas. We can’t cancel our contract overseas." Delivery premiums for overseas material are already at 9 to 11 cents per pound, he said.

For others, the upcoming high premiums has "everything to do with the (LME) warehouses," a second copper buyer said. "Copper producers and merchants have so many incentives with the pricing schemes at the warehouse."

This adds to the growing long queues out of the warehouse. Currently it takes up to two years to get copper out of warehouse, with premiums of $70 to $120 per tonne in New Orleans and $70 to $135 per tonne in St. Louis, according to AMM data.

Despite steady premiums, copper prices remain low. Comex copper prices dropped again this week, with the July contract settling at $3.041 per pound June 26.

This has prompted some companies to hold onto material previously purchased at around $3.30 per pound, a third trader said. These companies will be reluctant to sell, contributing to a tightening supply of copper.


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