Copper Premium in Europe Seen at 15-Month Low on Weak Demand

Aug 01, 2014 10:10 am ET

(Updates with analyst comment in third paragraph.)

Aug. 1 (Bloomberg) -- The surcharge that copper buyers are expected to pay to secure the metal in Europe declined to a 15- month low amid weak summer demand and ample supply, according to three people who trade the market.

The spot premium is about $90 a metric ton delivered to Rotterdam in the past month, said the people, who asked not to be identified because they aren’t authorized to speak to the media. That compares with $110 as of July 4. The surcharge, which ranged as low as $75 and as high as $100, is the lowest since April 2013. Traders cited slow demand in Europe as factories shut for summer vacations. Better availability of scrap metal further curbed demand for refined copper, they said.

“The seasonally weaker third quarter progresses,” Vivienne Lloyd, an analyst at Macquarie Group Ltd. in London, said in a report yesterday. “We expect to see further deterioration here.”

Europe accounts for about 18 percent of global copper consumption, according to Macquarie. The premium is added to the price for immediate delivery on the London Metal Exchange and is for a cathode, a form of refined copper. One trader gave a range of $75 to $80 a ton, another cited $85 to $90 and a third said $100.

Copper for immediate delivery on the LME settled today at $7,078 a ton, down 0.8 percent from yesterday. European stockpiles monitored by the exchange fell 20 percent in July to 9,950 tons, the lowest since 2006.

Russian Prime Minister Dmitry Medvedev signed a decree July 22 canceling tax on exports of refined copper and nickel. The country, the fifth-largest producer, had output of 878,000 tons of refined copper last year, according to London-based consultancy CRU. Russian producers may soon switch to shipping cathodes to Europe, from wire rod, suppressing premiums, according to Macquarie.

--With assistance from Maria Kolesnikova in London.