Japan Cu Smelters Start Annual Talk with Asia Contract Buyers

Japanese copper smelters started negotiation with Asian ingot contract buyers for 2011 shipment. The buyers seek higher purchase volume while the smelters have no additional capacity when the smelters are forced to reduce the production due to ore shortage. The buyers try to increase the purchase weigh for contract based transaction when the copper ingot supply gets tighter worldwide. The buyers could pay additional US$ 150 per tonne of premium on more than US$ 8,000 of market price when they try to purchase ingot spot basis under tight supply. With long term contract, they can purchase the ingot with around US$ 100 of premium. The premium is more than US$ 100 per tonne in spot transaction in Asian market even under the oversupply. A source in Japanese smelter said the firm paid US$ 150 of premium to purchase spot ingot in the summer. Recent premium decreases to less than US$ 100 per tonne for some transaction when Chinese buyers reduce the purchase volume. However, the premium could increase again when Chinese demand is expected to increase in 2011. International Copper Study Group (ICSG) announced in October world copper supply is 435,000 tonnes lower than the demand in 2011 while the supply is 200,000 tonnes higher than the demand in 2010.