CODELCO to Reduce Cu Ingot Premium to Less than US$ 100/t

Corporacion Nacional del Cobre de Chile (CODELCO) is expected to reduce the copper ingot premium to around US$ 80 per tonne for European buyers for 2009 shipment, which is around US$ 35 or 30% lower than 2008. The premium decreases to less than US$ 100 for the first time since 2004 under slower economy and copper consumption.

The premium, which is additional charge on ingot price at London Metal Exchange depending on the market condition and regional supply balance, is negotiated with buyers in each region. After European settlement, Japanese buyers are expected to get offer from CODELCO. Japanese premium should decrease to less than US$ 100 per tonne for 2009 shipment from US$ 102 for 2008.

Japanese construction market is in slump when electric copper wire shipment decreased for 12 months in a row through August, according to Japanese Electric Wire & Cable Makers’ Association. Japanese automakers also reduce the consumption under slower demand.

The lower premium also suffers Japanese copper smelters’ profitability. The smelters are squeezed with lower ingot selling price and higher ore purchase cost.