Copper Spot Premium Rebounds for China

Copper ingot spot premium price rebounded for Chinese market. The premium on market price of London Metal Exchange is around US$ 120-130 per tonne, which is US$ 30-50 higher than recent bottom in April and May. The higher premium reflects tighter supply for immediate delivery in Asia under strong Chinese demand when Japanese copper smelters have limited additional shipping capacity under recovering Japanese demand.

Copper inventory registered to LME was 454,250 tonnes on Thursday, which was 18% lower than recent peak in mid-February. The inventory in Asian warehouses started to decrease since January and the stock was 32% lower for Busan, South Korea and 68% lower for Singapore from the peak. The stock in Asia is lower than other areas while the stock was 17% lower New Orleans, USA from the peak. Japanese copper smelters recognize the lower Asian stock level due to strong demand in China.

Chinese buyers still seek spot supply to Japanese smelters. However, Japanese smelters cannot provide additional metal with limited capacity. Available immediate metal is only in LME warehouses with 68,000 tonnes stock in Busan and 9,000 tonnes in Singapore. However, many of metal in the stock are estimated to be lower grade metal. The buyers are wiling to pay higher premium for high grade Japanese metal.

Japanese smelters have long term contract with Japanese major buyers including rolled copper makers and electric wire makers when they booked at same volume for 2010 shipment as second half of 2009. However, the buyers seek higher volume of metal within the allowance to meet recovering domestic demand. Japanese smelters have limited volume for spot market when they have to meet higher demand from contract buyers.