Europe, China copper markets hit by slowdown in activity: sources
London (Platts)--28Jun2012/750 am EDT/1150 GMT
Both the European and Chinese physical copper markets were reported
"dead" this week, with little deals to report as the summer slowdown kicked
in, with Chinese premiums "softening" and European unchanged.
One source said that in China there is a "pretty clear softening of
On a CIF basis he said he had a reliable contact who had picked up small
tonnage for around $35/mt CIF Shanghai. He noted that buying in bulk didn't
get you a discount, it in fact incurred a higher premium, "if you want around
5 mt then you are going to be paying around CIF $60/mt."
The source said that historically this time of year is slow in China and
that, owing to being well stocked, they will unlikely add the stimulus to
push LME prices higher, "however if there was a sharp decline in LME prices
then the Chinese may start buying."
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He quoted bonded warehouse stocks around 500-600,000 mt, "it's difficult
to get an accurate handle on that number though. What's also interesting is
that Shanghai registered stocks are building."
Market consensus is around that figure.
He said for cleared customs material, not CIF nor bonded material,
premiums have dropped from Yuan450/mt [$70/mt] to a slight discount over the
past 4 days, "traded volume is also lower," he said.
He also noted that the tightening in the LME spread over recent days,
"may have encouraged sellers back into the bonded market."
Citibank analyst David Wilson told Platts: "We're not likely to see any
China stimulus until after March 2013, when the new premier takes office.
Aside from that, all decisions are essentially a holding exercise, so don't
expect a surge in Chinese demand anytime this year."
EUROPEAN PREMIUMS REMAIN UNCHANGED
Looking at European demand, one producer source said: "It's dead. Very
quiet, premiums could be $60-70-80/mt, there's no volume in the spot market."
A trader agreed: "Europe is dead. I've not done anything. I heard a
rumor that the Chinese are approaching European producers. In China I'd say
$55-80 on premiums, quality dependent."
A second producer said that they had not heard of the Chinese European
producers, "what for?"
They couldn't give a gage on Grade A premiums, "I have done nothing,
I've not been in the market. Standard grade material I would say is flat, it
all depends who you are selling to."
Again, the overriding theme was that the market is "dead" in Europe.
Platts European premium assessment stuck at $60-70/mt plus LME cash for
Grade A in-warehouse Rotterdam. CIF Livorno remained at $50-60/mt plus LME
cash and Russian Standard CIF Rotterdam at $0-30/mt, quality dependent.
A second trader said, "it's difficult, there's absolutely nothing going
on. It probably means there is some slack in the market [excess material],
also customers are feeding hand-to-mouth."
He noted that in in a couple of months the market is likely to reignite
as customers draw down stocks, "I see a similar situation as in
January/February this year. Last October/November/December the market was
dead, then suddenly people needed to cover for material and premiums shot
However, with the nearby spreads in contango, making warehousing
cheaper, he said that people could keep premiums elevated, "no one is going
to sell cheaply, I sold yesterday at $85/mt [CIF Shanghai]."
TC/RC CONTRACTS REMAIN UNCHANGED, MEANING MARKET UNCHANGED
Mid-year contracts for copper processing treatment and refining fees
between diversified miner BHP Billiton and LS-Nikko Copper have been kept
unchanged for 2012, according to a note from brokerage Ambrian Thursday.
"An alteration to the [treatment and refining costs] fee structure
usually comes about due to changes in the supply/demand of copper
concentrate, which is fed into the smelters. For example, a shortage in
copper supply will see a fall in copper processing fees," the broker said.
"Therefore, copper concentrate supply/demand has remained largely
unaltered from 12 months ago," it added.
China's 2012 domestic output of copper products is expected to grow
10-15% from 2011, less than the 18% growth seen last year, Beijing Antaike,
the state-run metals research company said in Beijing Thursday.
It attributed the slower output this year to weak demand expected from
key downstream consuming sectors.
However, on Wednesday Platts reported that diversified miner BHP
Billiton believes that underlying long-term Chinese demand is strong. This
correlates with what Macquarie analyst Duncan Hobbs told Platts Tuesday.
Hobbs sees a decade of solid consumption growth in China.
--Ben Kilbey, firstname.lastname@example.org
--Edited by James Leech, email@example.com