April 19, 2012 / 2:03 PM / 7 years ago

Copper prices remain well supported, Aurubis says

* Copper prices to remain high

* Hopes of good U.S. demand backwardation factor

* European copper inventories low

HAMBURG, April 19 (Reuters) - 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 on Thursday.

“The copper price...continues to be supported despite its volatility and will remain high for the time being,” Aurubis said in a market report.

Three-month copper on the London Metal Exchange traded down $45 to $8,005 in official midday Thursday rings, having hit a three-month low of $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, Aurubis said, but demand factors also played a role.

“The improved mood regarding the U.S. economy is also seen as a cause, as it could lead to higher copper demand,” Aurubis said. “Although demand for spot cathodes (newly-produced copper) in North America is currently moderate, the start-up of the inventory reduction has secured quantities for later deliveries.”

Another factor is that European LME warehouses currently contain only about 36,000 tonnes of copper against 54,000 tonnes in early December 2011, Aurubis said.

“Delayed cathode shipments from South America led to temporary supply bottlenecks in Europe, with higher premiums accordingly,” it said. “The situation has eased somewhat again in the meantime.”

“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, an awareness of signs of scarcity in the U.S. market and Europe has increased further.”

“This is a clear contrast to the more relaxed (inventory) situation in China.”

CONCENTRATES MARKET STABLE

The trend on the global spot market for copper concentrates has not changed compared to the previous month, Aurubis said:

Copper concentrate treatment and refining charges (TC/RCs), fees paid by miners to smelters to refine concentrate into metal, are a key part of the global copper industry’s income.

TC/RC trading has been thin in the last month because of limited availability of free concentrate supplies and low smelter demand, it said.

“The copper scrap supply remains at a good level in Europe without the disruptive influence of Asian buyers,” it said. “European demand for copper products can still be considered restrained overall at the beginning of the second quarter of 2012. This is especially true for southern Europe.” (Reporting by Michael Hogan, editing by William Hardy)

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