This is going to get worse and worse:
Reuters
Asia Metals-Copper premiums up on tight supply, freight
Monday February 16, 3:01 am ET
By Robin Paxton
SINGAPORE, Feb 16 (Reuters) - Copper premiums in Southeast Asia have risen to take account of shipping costs from the U.S. and Australia as buyers are forced to look further afield for metal, traders said on Monday.
They said copper supply in Asia was extremely tight. London Metal Exchange (LME) warehouses in the region have been empty of copper for some time and smelters are contending with a shortage of their key raw material, copper concentrate.
"The freight is the killer. That's why the numbers are so high," said a trader in Singapore.
He said he had sold forward copper from the U.S. at a premium of $210 a tonne CIF Southeast Asian port over the LME cash settlement price.
"We're shipping it all the way from the States," he said.
LME copper stocks at its warehouses in Singapore and South Korea are zero. Of the LME's total copper stocks of 323,225 tonnes, most are held in U.S. warehouses.
Modern Panamax dry bulk rates for the benchmark U.S. Gulf to Japan route were quoted at $70 to $75 a tonne last week, brokers said.
This was down from around $80 a week earlier but almost double the $40 rate quoted at end-September for early-November shipment last year.
"We've done some very small deals. Customers are buying the minimum quantities required," another trader in Singapore said.
He said he had quoted premiums of $200 a tonne CIF for Australian-origin copper.
Other traders said copper was being offered at $180 CIF Malaysian or Thai port a tonne over the LME cash price. But there is very little spare material on offer in the region.
"Worries about supply are very big in the Asian market," a Tokyo-based copper trader said.
LME BACKWARDATION
LME copper remains in backwardation -- meaning the cash price is higher than the three-month delivery price -- of around $25.
"The extent of backwardation in the copper market is a reflection of the steady decline in inventory levels," Deutsche Bank Global Markets Research said in its Commodities Weekly bulletin dated February 12.
"If this persists it will simply increase the precariousness of the market," it said.
Benchmark LME three-month copper (MCU3) shot to an eight-year high of just under $2,730 on Friday before ending the kerb at $2,691. The metal was trading at $2,691/2,692 a tonne by 0720 GMT on Monday.
The recovery in world industrial production and the declining U.S. dollar continues to entice more investors to metal, as contracts become cheaper in other currencies when the dollar slips.
Industry analysts saw the LME copper price consolidating and climbing again towards highs of around $3,100 last seen in 1995.
World refined copper consumption was forecast last month by London-based Metal Bulletin Research (MBR) to rise 5.4 percent year-on-year in 2004 to 16.35 million tonnes.
World production was forecast to rise 5.3 percent to 15.95 million tonnes in the same comparison, MBR said. |
