Copper premiums strengthen as supplies tighten By Camila Reed
biz.yahoo.com
Thursday April 16, 5:14 pm Eastern Time
LONDON, April 16 (Reuters) - The rise in copper premiums shows no sign of abating for at least six weeks and even standard grade Russian metal was fetching up to a $10 premium over London Metal Exchange (LME) prices, said traders and consumers on Thursday.
The shortage of copper scrap combined with delays in Russian shipments and tightly held warrants has boosted prices sharply.
Standard grade metal, which is of an inferior quality to Grade A LME-approved cathode, usually trades at a discount to the LME cash metal price.
The premium has been narrowing for the last few months and as supplies have dwindled Russian copper has been sold flat to $5 a tonne premium.
One European consumer paid $10 for metal in Rotterdam this week. ''It is not a cheap game anymore,'' he said.
The delay of three Russian ships with an estimated 30,000 tonnes of copper has aided the rise in premiums. One ship was due to arrive on Thursday with the other two expected at the end of April.
German refiners told Reuters they were responsible for the drawdown in stocks from the LME's Hamburg warehouse. These now house 36,750 tonnes of metal with 15,350 tonnes on cancelled warrant awaiting shipment. A month ago there were over 55,000 tonnes of LME copper in Hamburg.
''We had to replace the Russian material and the quickest way was to use the LME's warehouses,'' said one German refiner.
They are concerned that shipments will continue to be delayed, since the same vessels bringing the copper in must return for more metal, and the upcoming flooding season at the port of Dudinka may further slow things down.
Another shipment has also been providing fodder for market rumour and speculation.
A vessel containing some 15,000 tonnes of Chilean copper is said to be en route to Bilbao, said traders.
What was termed a ''ghost-ship'' by one trader, began to take shape. The vessel firstly said to be sailing to Trieste and then Barcelona now seems set to dock in Bilbao.
This said consumers and traders was chosen because the cost of removing the metal from Bilbao is very expensive and it takes time to deliver metal from Spain to Northern Europe which is a more copper intensive usage area.
Some traders even doubted whether the metal would be put on warrant. ''It has probably already been sold since demand is very good in Europe,'' said one.
But rising LME prices and the return of the backwardation have begun to cast a shadow over the market so the situation may alter within six weeks, said traders.
The LME cash/threes spread, which has been in contango since late-August 1997, whipped into a $6 backwardation on Wednesday.
There is also growing scepticism amongst some traders over the supposed dearth of metal.
''I think there is a lot of manipulation in the market. I am sure there is unsold metal. I still think there is a surplus of copper. There is 400,000 tonnes of copper in exchange (LME/COMEX)warehouses,'' said one sceptic.
''I still think that a couple of players who squeezed the market last year are trying to do it again this year,'' he added. |
