Copper premiums ease on caution over Europe debt
reuters.com
Fri Sep 16, 2011 12:04pm EDT
* Physical market almost at a standstill-merchant
* End users buying hand to mouth
* Concentrate market tightens following strike-Aurubis
By Harpreet Bhal and Melanie Burton
LONDON, Sept 16 (Reuters) - Copper premiums in Europe could ease further in the usually busy months ahead, as fears of spreading turmoil in the euro zone encourage consumers to buy only what they immediately need.
The premium for copper Grade A Rotterdam CU-GA-ROT was quoted in a range of $40-60, with bids as low as $20 seen and offers as high as $70.
It's about $40-50," said a source at a European copper product fabricator. "There is a lack of demand. It's not dramatic but we feel less demand for our products as less material is needed for production," he added
"September, October and November are usually strong months seasonally but there is a lot of uncertainty in the European market at the moment."
Copper demand typically picks up after September, when northern hemisphere industry returns from summer vacation but this summer the spectre of a Greek sovereign default has encouraged end users to purchase only hand to mouth.
Two producers that sell mostly on contract, but also with some spot business, said they have not completed any transactions of late.
"We haven't done anything in Europe recently," said one.
A European merchant said that due to an absence of buyers, copper premiums in Europe were "collapsing", quoting copper premiums in Rotterdam between $20 and $30.
"Brokers might still try and get $60-70 for the material but the actual physical market in Europe has pretty much come to a standstill."
The trader said the easing in premiums came from producers that have bet on rising prices, while demand had dropped from product makers, who, having over-ordered during the course of this year, have turned into spot sellers as well.
"We expect this to go on until mid to end October. We already see some people that want to liquidate on October. Unless something dramatic happens to pick things up we do not see anything changing," he said.
Another trader, at a bank with LME category 2 status, said that a healthy financing environment was reflected in the futures curve which would cushion premiums from falling much lower.
"Sept-Oct is $10 - I haven't seen a monthly spread like that for a while. That's 30 cents a day. It's not getting to the aluminium cash and carry levels, but it's certainly a lot healthier than it has been," he said.
"It shows you that demand isn't great to be honest with you," he said.
LME WEEK BULLS
Still, traders said sentiment could still shift during LME week in early October, an industry week, centred around London Metal Exchange trade.
During LME week, term contract negotiations for 2012 are typically hammered out, while the treatment and refining charges that big miners such as BHP Billiton, Xstrata, pay smelters to refine their concentrates are also agreed around this time.
This may add another dimension to the slackening premiums, another trader at a category 2 LME member said.
"It may also be a bit of window dressing prior to (Chilean copper miner) Codelco negotiations...That's what I think the bigger picture is," he said.
In general, copper futures prices have been supported by its taut supply pipeline, with declining ore grades, a long ramp up time for new projects, and more recently, a series of strikes.
Industrial action by thousands of workers at Freeport McMoRan's Indonesian copper mine and port has delayed around 133,000 tonnes of copper ore concentrate shipments, industry officials said on Friday.
Meanwhile workers at Freeport's Cerro Verde copper mine in Peru, which produces around 2 percent of the world's mined copper, started an indefinite strike on Wednesday.
"The concentrate supply in the spot market has become scarcer due to the recent mine strikes," Europe's top copper fabricator, Aurubis said in a note on Friday.
"At the same time, some smelters, e.g. in Japan, are having scheduled standstills, so demand is currently reduced as well. Nevertheless, the TC/RC level is already significantly lower."
The second LME trader said: "The concentrate market is $40 (a tonne) and 4 (cents per pound)...so it's getting tighter. I definitely was trading at 50 and 5 fairly recently." (Editing by Susan Thomas) |
