Washington (Platts)--13Dec2012/632 pm EST/2332 GMT

In the final weeks of December, business has remained predictably muted in the US copper cathode market, and at least one source had a ready explanation.

"I think everybody is trying to use as much scrap as they can," a cathode merchant said. "If they can't, they'll buy cathode."

However, he added that he had a potential deal on the table for 2013. "It's the same price as last year," he said. "It's a little over [spot COMEX plus] 7 cents, but it's [to] an odd location" in the Midwest.

The merchant said the customer is potentially buying 500 mt of cathode at payment terms "a little longer" than the usual cash-to-10-days terms.

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A cathode buyer also said the deal he made for next year largely mirrors 2012's annual supply contract and added that, despite the uncertainty expected to linger in 2013, his company decided locking in a certain amount of cathode made sense.

"We did almost identical [business] in volume and in premium," he said. "It['s for Grade 2 cathode, rather than Grade A, so we got a really good premium," the buyer said, adding that the transaction's premium is less than 4 cents. He estimated his premium for Grade A cathode will be roughly 1.5- 2 cents higher. The buyer said the deal calls for Grade 2 cathode, with Grade A cathode as a back-up material.

"We think business levels are going to be about the same [in 2013]," he said, "and we think the [2013 contract] offers that we accepted are going to be better than the spot market will be next year. We felt the risk-reward was in our favor."

The buyer added that, in coming to that conclusion, this year's aluminum market provided somewhat of a cautionary tale.

"You look at what happened in aluminum, which is scary. There are 5 million tons in the [warehouse] exchanges and aluminum premiums skyrocketed this year, which makes no sense. So we said, 'Let's just take that risk off the table. We buy scrap and that risk [of fluctuating discounts] remains, so let's lock in our cathode, we know what our costs will be.'"

With business flatlined as companies begin shutdowns for the holiday season, Platts price assessment for copper cathode was steady this week at spot COMEX plus 5-6 cents/lb., delivered Midwest.

--Laura Gilcrest, laura_gilcrest@platts.com
\--Edited by Robert DiNardo, robert_dinardo@platts.com

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