Reuters reported that copper prices will remain well supported despite recent weakness, with hopes for a recovery in the United States a factor causing firm prices for nearby metal deliveries.
Germany's Aurubis, Europe's biggest copper producer said that the copper price continues to be supported despite its volatility and will remain high for the time being. Three month copper on the London Metal Exchange traded down USD 45 to USD 8,005 in official midday Thursday rings, having hit a three month low of USD 7,885.25 early this week.
Aurubis noted that London Metal Exchange copper futures have moved into backwardation, a state where firm demand means nearby delivery prices are higher than contracts for later deliveries. The build up of two players' trading positions was key to creating LME copper backwardation but demand factors also played a role.
The company said that the improved mood regarding the US economy is also seen as a cause as it could lead to higher copper demand. Although demand for spot cathodes in North America is currently moderate the start up of the inventory reduction has secured quantities for later deliveries.
Aurubis said that another factor is that European LME warehouses currently contain only about 36,000 tonnes of copper against 54,000 tonnes in early December 2011. Delayed cathode shipments from South America led to temporary supply bottlenecks in Europe, with higher premiums accordingly. The situation has eased somewhat again in the meantime.
It said that nonetheless, now that there are reports that the Chilean copper producer Codelco had to purchase copper volumes in the spot market earlier in the year to fulfill its delivery obligations due to insufficient production awareness of signs of scarcity in the US market and Europe has increased further. This is a clear contrast to the more relaxed situation in China.
