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?"

JAPAN IMPACT

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 processed elsewhere."

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 said.

In the second ring on the London Metal Exchange copper -- basis three-months -- was traded at $9,525/mt.

--Ben Kilbey, ben_kilbey@platts.com

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