Codelco raises premium on Yokohama copper by 15%

Analysts say the move reflects expectations of robust demand in parts of Asia for the Chilean producer's product

TOKYO/SINGAPORE (Reuters) - 

Chile's Codelco has lifted its term premium for copper to the Japanese port of Yokohama to $75 a tonne in 2010, a rise of 15% from 2009 that reflects expectations of robust demand in parts of Asia, industry sources said on Monday.

Codelco, owned by the Chilean government and the world's biggest copper miner, left premiums for its European customers unchanged at $80 a tonne, industry sources said in September.

An improving economic climate in Asia, with demand expected to be robust in China and South Korea, led to the rise in premiums for the region, traders said.

But they also said not all parts of Asia were expected to show a further pickup in demand.

"I don't think the view about copper demand in Japan is quite so bright," a source at one of the Japanese firms with a contract said.

The source also said Codelco, which typically sets the benchmark for term premiums for refined copper in Asia, had only given word on the premium for Yokohama and not the other major ports of Nagoya and Osaka.

Demand for copper, which has a variety of uses from electronics to the power industry, has fallen sharply this year due to the economic downturn.

Industry sources say consumption in Japan is back up to about 80% of its level last year, although they remain worried about the strength of the recovery due to an unclear outlook.

The annual copper premium, which is above the cash price on the London Metal Exchange covers freight, insurance and other costs, was set at $65 to Japan in 2009.

The Codelco premium to China, which was cut to $75 in 2009, has not been set yet for 2010, and buyers have said that talks should be held next week.

Chinese merchants expect Codelco to increase term premiums by about $5-$10 a tonne for 2010 delivery.

"It's quite promising. It goes to show that there is more optimism about demand in Asia, and consumers here seem willing to pay up to secure material," said Jonathan Barratt, managing director of Commodity Broking Services.

"China really needs copper so they might surprise on the upside. They may settle sooner at slightly higher levels than risk even more evidence of a rebound in demand that would strengthen Codelco's hand," he said.

Large-scale imports by China, the world's top consumer, which hit successive record highs in the first half of the year, pushed up apparent consumption in China by 48 percent to 5.57 million tonnes in the first nine months of the year.

A shortage of scrap and restocking by the State Reserves Bureau helped draw in huge volumes of metal. Real consumption for the year is seen up 10.2% at 5.4 million tonnes, and will rise 8 percent in 2010 to 5.83 million tonnes, state research body Antaike said.

South Korea's government has also been actively stocking up on copper this year, taking advantage of the crash in commodities which saw copper prices plummet from record highs of almost $9,000 a tonne last year to less than $3,000.

Copper on the London Metal Exchange (LME) is currently trading around $6,590 per tonne. (Editing by Michael Watson)

© Thomson Reuters 2009 All rights reserved

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com

Print story      Email story      Subscribe to free newsletter

Back