Reuters reported that spot market premiums for copper have fallen slightly in Europe as restocking wanes and demand ebbs amid an escalating debt crisis, leaving manufacturers with little reason to stock up on the metal in anticipation of rising product sales.
The decline in premiums while not dramatic does not bode well for a European economy that is heading into recession. Premiums are the price paid over and above the London Metal Exchange cash price to secure delivery of the physical metal.
They denote the state of the physical or real economy, as opposed to futures markets which try to predict future price trends. Premiums, however also indicate the extent to which futures market predictions are transpiring on the ground.
A Europe based trader said that "Compared to say early April copper premiums are clearly weaker now. Underlying demand was better in the first quarter. People were selling a lot more copper products than they thought they would. Nobody talked about Greece in January, February, but now its back in the news. People are worrying about what's going to happen and its definitely had an impact."
Spot market premiums for grade A copper in Rotterdam were last qouted around USD 60 per tonne to USD 80 per tonne. They were quoted at around USD 80 to USD 90 in mid April.
A London based physical metal trader pointed out demand for copper has by no means collapsed and premiums remain underpinned by still tight supply and by demand from Germany, a key manufacturer whose economy remains robust. But even in Germany Aurubis AG, the continent's largest copper smelter, said last week it expects demand for copper products to remain restrained given the uncertain economic outlook.
