copper premiums are easing back toward $100 per tonne in the
European market as scrap supply improves and traders offer
material more freely, sources told AMM sister
publication Metal Bulletin.
Bulletins in-warehouse Rotterdam copper premiums
fell to $105 to 130 per tonne Sept. 3, down from $120 to $140
at the end of August and eight-year highs of $160 in
The decrease in
premiums has coincided with a moderate rally in outright copper
prices on the London Metal Exchange over the past month that
has taken copper prices above the $7,000-per-tonne
A further upward price
move could start to sap Chinas strong appetite for
imports, while simultaneously triggering an increase in copper
scrap supply. Both could weigh on the high premiums seen
recently across the globe, sources said.
The price rally has
already contributed to a slackening in scrap supply in Europe,
easing conditions for fabricators who were forced to substitute
high-grade secondary feed for cathode due to the earlier
breakdown in scrap supply as prices dropped below $7,000.
At the same time, as
scrap supply has improved, there are signs that Chinas
end-use demand for cathode might not be as strong as recent
imports suggest, which could in turn put pressure on premiums
outside of Asia.
The slump in spot
premiums should also be examined in the context of negotiations
for 2014 supply contracts, which will kick off in earnest next
month during LME Week, sources said.
"It is that time of
the year when people start thinking strategically about supply;
you see that not only in cathode premiums but in concentrates
as well," the analyst said.
Corporación Nacional del Cobre de Chile (Codelco) agreed
to term premiums of $85 per tonne with European consumers and
around $100 for Asian customers. "The weaker spot premiums will
play into consumers hands, but the consensus at this
stage is still that contract premiums will rise, particularly
in Asia," the analyst added.
At the time, sources
said Codelco and other producers might struggle to contract
substantial tonnages on those terms at a time when spot
premiums were quoted at $50 per tonne.
Today, the situation
has reversed. Spot Shanghai premiums are at $160 to $190 per
tonne, still nearly twice as high as contract terms, even after
the drop from highs of $205 to $220 in early August.
unusual to have any sort of agreement at this early stage, but
there seems to be little doubt that premiums will go up.
Its just a question of how much," the physical trader in
A version of this
article was first published in AMM sister publication Metal