Healthy manufacturing order books and limited copper availability have caused European spot premiums to rise as the European market moves towards the peak demand season of the second quarter, traders said Friday.
Spot premiums over the London Metal Exchange cash copper price have risen to $100 a metric ton for grade A LME registered cathode, basis cost, insurance and freight Rotterdam. This is up from around $40/ton a month ago.
Market talk of minor shipping delays from South America to Europe mean spot premiums are likely to rise further, they said.
"Copper could get very tight as consumers have been working hand-to-mouth for a long time. Premiums could go to $120-$130/ton," a trading source said.
Traders are reporting a large number of inquiries for May and June as manufacturers' order books are full.
Domestic demand, particularly in Germany, is picking up after years of stagnation, German engineering association VDMA recently said.
"Generally the market is very healthy, and it's a bit tighter than normal. Premiums could go very high," a trader said.
LME stocks, a proxy for availability in the physical market, total only 650 tons in Europe. The bulk of copper stocks – totaling 132,950 tons – is in Asia.
The uneven distribution of stocks could support prices in the near term, analyst Will Adams at BaseMetals.com said. |
