PT: European physical copper end-users in spot market, premiums high
Physical copper premiums stayed high in Europe this week on a mixture of factors including a lack of material due to previous arbitrage shipments to Shanghai, low inventory forcing end-users to shop in the spot market and delays to vessels coming from Chile, according to sources.
Two producers said that over recent months, uncertainty had led end-users to whittle down inventory and that now they are being forced to buy spot.
But when the arbitrage window was open a few months ago, and European business was dead, waves of material were shipped over to China. Shanghai is now awash with material, coupled with low demand, pushing premiums down to around $50/mt, sources said.
The market confirmed that "one or two" vessels from Chile are delayed "which could affect end-users" in Europe. No reason was given for the delay. One of the producers said he was seeing some signs of recovery in the European physical market.
A trader said of the delays: "It's just to get premiums up. They are diverting material to Europe and buying in cheaply from the Shanghai bonded market to supply against long term contracts."
"The world and his wife went crazy long of physical material in China as they thought Europe was going to fall over. Hence the distorted situation," he added.
MARKET MESS
A second physical copper trader told Platts that the market is "a mess. It doesn't look good. The beginning of April looks painful." The market is backwardated which makes warehousing material expensive.
The trader added that the recently reported lack of material in Europe, which has pushed premiums higher, was likely to start reappearing. A producer agreed.
"Sentiment is people don't know what's going to happen tomorrow. People were waiting on China, where are they?," said the trader. He put premiums in Europe between $50-70/mt, basis CIF Rotterdam. For China bonded he put the price between $40-50, CIF Shanghai.
A third trader confirmed selling 1,000 mt CIF Rotterdam at a premium of $80/mt. Both producers put premiums between $90-100/mt. Producers are the primary sellers.
The Platts European premium assessment for Grade A copper in-warehouse Rotterdam remained at $50-85/mt, plus LME cash. Grade A CIF Livorno stayed at $50-60/mt, same basis. Premiums for CIS cathode held at $0-30/mt, quality dependent.
GERMAN CONCERNS
The German federal government's decision to phase out nuclear power following last year's Fukushima disaster in Japan poses a potential risk to power supplies to the country's industry, German copper producer Aurubis said Thursday.
The decision to decommission seven base load power plants "is a risk for us because the Federal Government's legislative package does not ensure that electricity will remain secure and affordable for Aurubis," said Peter Willbrandt, Aurubis' CEO, at the company's annual general meeting in Hamburg Thursday.
Aurubis is Europe's largest copper producer. Globally, the company's copper cathode output is second only to Chile's state-owned Codelco.
The company uses 1 billion kWh of electricity annually -- about as much as a city with 600,000 inhabitants, such as Dusseldorf or Stuttgart, Willbrandt noted.
