U.S. copper premiums seen unchanged in 2015

Wed, 12 Nov 22:41:00 GMT


PALM BEACH, Fla., Nov 12 (Reuters) - U.S. premiums for 2015 are not likely to change much from this year's terms, as demand in China, the world's No. 1 end user, slackens and supplies increase, sources said as the most intense talks over supply contracts in years kicked off.

In the first round of talks at the American Copper Council meeting on Wednesday, producers pushed for a small increase of a quarter of a cent per lb on the premium, which fabricators pay for physical delivery on top of the benchmark Comex futures price, six sources said.

But consumers who use copper to make electrical wire and tubing for plumbing have pushed for surcharges to be unchanged, six sources said. That would be around 3.5-4 cents per lb.

With copper futures prices down 10 percent so far this year, Codelco cutting premiums into China and concerns about the country's appetite for copper after the Qingdao financing scandal, end users are in their strongest position in years to negotiate better terms. [ID:nL3N0T14J8]

Still, with copper at the London Metal Exchange at a rare premium to Comex futures, which represent the U.S. prices, it will be less attractive to sell foreign metal into the United States, some said. That may mean higher premiums for imported material.

"This season will be more complex," said CRU analyst Matthew Wonnacott. "The Comex/LME arbitrage has moved to put pressure back up on premiums."

No deals were signed at the industry gathering in Palm Beach, Fla. which kickstarts negotiations between producers and end users, and market participants expect the haggling between both sides to continue well into December.

One merchant said soaring trucking costs due to a lack of drivers and tighter regulations of the industry justify an increase, particularly for customers who live inland.

For consumers, who use copper to make electrical wiring and plumbing materials, keeping the premium steady will come as a relief after a whopping 60-percent hike for 2014 contracts.

It is much lower than the spot premium of 5-6 cents per lb and below European levels of $112 per tonne, equivalent to 5 cents per lb, offered by Codelco [CODEL.UL] for next year. [ID:nL6N0S81M9]

The construction industry, which accounts for a third of copper consumption, has underperformed this year, even though U.S. housing starts have improved, Wonnacott said.

(Reporting by Josephine Mason; Editing by Diane Craft)

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