European physical copper market stagnates, premiums shrink
London (Platts)--18Mar2011/1223 pm EDT/1623 GMT
The physical copper market remained stagnant this week with premiums
under pressure as no business was being concluded, sources said.
One trader said that for Grade A material, basis CIF Rotterdam, premiums
had come down to around $30-40/mt. However, he noted that, "how much are you
selling at $40 -- zero. At $30 -- zero."
Still, the trader said that didn't mean the physical market is "dead,"
just that there is a bounty of material out there.
A producer said that he had "no clue" on premiums as he had cut no deals.
The last deal he did conclude was around $70/mt Grade A CIF Rotterdam.
The trader said that premiums hadn't been at that level for "weeks."
A second producer source said that they would put premiums -- same basis
-- around $70/mt. They said however, "there's nothing new. People are waiting,
what for I don't know?"
There was some attention on the situation in Japan. European copper
fabricator Aurubis expects the aftermath of the recent earthquake and tsunami
in Japan to change the market dynamics for copper and push treatment and
refining charges higher.
In a note to clients, Aurubis said the market for copper concentrates
could be affected by the situation in Japan, "as the country is a major
purchaser of this copper raw material. In 2010 the Japanese smelters processed
about 1.35 million mt of copper in concentrates."
"A reduction in their demand would cause the treatment and refining
charges in the spot market, which are still currently about $60/mt and 6
cents/lb, to rise substantially," it said.
"Deliveries must now be redirected via distress sales to other
purchasers. The European copper scrap market continues to have a good supply,
so refining charges are stable and at a high level," the company said.
Japan produced a total of about 1.53 million mt of refined copper in
2010. In contrast, domestic demand amounted to just a little over 1 million
mt. Japan is a net exporter.
In a separate note HSBC senior analyst, James Steel, said: "In terms of
base metals, Japan is an important metals processor, and it has a large copper
smelter industry. The impact on copper should be modest. Electricity-related
shutdowns of smelters, at latest count, represented about 25% of Japanese
copper refining capacity, but this is only about 2% of the global total. These
closures therefore should not have a significant impact on underlying
supply/demand balances. The global copper market has ample spare smelting and
refining capacity, so concentrate destined for Japan will be diverted and
The first producer source said that they didn't expect the situation in
Japan to affect the global market. He noted that the Japanese are likely to
turn to cathode rather than concentrate.
MARKET ACTIVITY MISSING, PREMIUMS EASE
A fabricator source told Platts that the market was unchanged from the
weeks before. "Cathode premiums are very weak. It's a buyers' market. I don't
see a tightness. At the end of last year producers thought they were kings."
He said that premiums are below $60 for Grade A material.
The trader said that even if it is a buyers' market there are no buyers
out there. "Business is OK. The physical market hasn't collapsed, you just
don't have to pay a premium for it," the trader said.
Platts assessment for Grade A copper in-warehouse Rotterdam shrunk to
$30-50 from $40-70/mt previously, plus LME cash. Grade A CIF Livonia material
eased to $50-60 from $70-90/mt. XIS cathode stuck at $0-60 -- quality
dependent. However some sources suggested a heavy discount for scrap. All
participants agreed that there is still a lot of scrap in the market.
In industry news, the International Copper Study Group said Wednesday
that -- based on existing facilities and announced project developments --
annual mine production capacity in the period 2011-2014 is expected to grow at
an average rate of around 4.9% a year. Capacity would reach reach 24.1 million
mt in 2014, an increase of around 4.1 million mt, or 21%, from 2010, the group
In the second ring on the London Metal Exchange copper -- basis
three-months -- was traded at $9,525/mt.
--Ben Kilbey, firstname.lastname@example.org
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