Japan Cu Smelters to Cut Ingot Supply for Asian Contract Buyers

Japanese copper smelters are concluding copper ingot price negotiation with Asian contract users for 2011 shipment. The premium is US$ 98 per tonne for users in Taiwan and South Korea and near US$ 115 for Chinese users as premium setting by Corporaci?n Nacional del Cobre de Chile (CODELCO). The smelters reduce the shipment to Asian buyers from 2010 shipment when they secure the volume for domestic buyers and they reduce the output while the offshore buyers sought higher volume.

Pan Pacific Copper reduces the output due to lower profitability with imported high cost copper ore. Sumitomo Metal Mining also reduces the output by 10% compared with the output capacity. Japanese copper demand reaches 1 million tonnes in 2010, which is the first 1 million tonnes level in 2 years, and the demand is expected to recover more in 2011.

CODELCO increased the premium to US$ 98 per tonne for Taiwanese and South Korean buyers and to US$ 115 for Chinese buyers for 2011 shipment compared with US$ 74-75 and US$ 85 respectively in 2010. Japanese smelters set the premium as CODELCO.

The buyers tried to secure more volume from Japanese smelters when world copper supply is expected to be major shortage in 2011 due to strong demand in China and emerging countries. International Copper Study Group (ICSG) expects 435,000 tonnes of shortage in 2011 compare with 200,000 tonnes of oversupply in 2010.

Major copper users usually secure copper requirement through contract with around US$ 100 per tonne of premium and purchase spot ingot when they need more ingot. However, the spot premium is well more than US$ 100 on price at London Metal Exchange and they couldn’t purchase at spot basis under shortage.