US copper premiums up on tight scrap, shipping costs

Fri Jun 3, 2011 3:33pm GMT
 

 By Chris Kelly
 NEW YORK, June 3 (Reuters) - U.S. copper premiums crept
higher this week, buoyed by rising shipping costs and a lack of
available scrap metal, an issue that could keep primary cathode
premiums on the rise in the months ahead.
 "Premiums are moving slightly up because the freight rates
are killing us," one Midwest dealer said.
 "If you're going to any distance from the docks, you're
probably anywhere from 5.5 to 7 cents per lb."
 Premiums paid over the COMEX spot market price HGc1 now
stand about 25 percent higher from the beginning of the year,
when they stood in a 4.5 to 5.5 cent range.
 Looking ahead, premiums should find further support from
companies looking to secure metal ahead of planned maintenance
shut-downs and employee vacation schedules that typically
accompany the seasonally slower summer months.
 "It's really going to depend on how much it is going to
cost to get it out of the warehouses and get it to where you
need it to go," the Midwest dealer said.
 For a graphic on COMEX warehouse stocks, click:
link.reuters.com/hen89r
 Supply tightness in the secondary scrap market, as seen by
the further contraction in price discounts to the COMEX spot
price, was another factor likely to keep primary premiums
buoyant this summer.
 "If the scrap market continues to tighten, they will have
to go to cathode. When there is demand like that, anything is
liable to happen," the Midwest dealer said.
 Spreads for Bare Bright copper, often regarded as the
highest grade of copper scrap, narrowed to a 5- to 12-cent
discount to the COMEX price, from 5 to 15 cents under at the
end of the first quarter.
 No. 2 copper scrap, which typically consists of a mixture
of wire and tubing with a 96 percent copper content, was quoted
at 42 to 48 cents under, in from 55 to 68 cents in March.
 "If one is running a melting operation and you need
high-grade copper units, be it bare bright wire or cathodes ...
when one becomes hard to find, you're forced into buying the
other," one East Coast scrap dealer said.
 "If copper scrap continues to be tight, then they're going
to start buying cathodes, which could squeeze premiums even
higher."
 (Reporting by Chris Kelly;editing by Sofina Mirza-Reid)


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