China smelters offer lower premiums to export copper cathodes

Wed Dec 5, 2012 11:03pm EST

* Premiums of $75 to $83 per tonne are about 12 pct to 21 pct lower

* Deals to Taiwan around $75 premium CIF

* Seen adding supply to southeast Asian markets

By Polly Yam

HONG KONG, Dec 6 (Reuters) - China's large copper smelters are offering 2013 exports of refined cathode at cheaper premiums, ranging from about 12 percent to 21 percent less, as they compete with major suppliers such as top world producer Codelco, boosting supply in Asia.

The premiums, of about $75 to $83 per tonne over cash London Metal Exchange copper prices, applied on deliveries to bonded warehouses in Shanghai or some Asian ports, traders and smelter officials said on Thursday.

Copper cathodes do not have to leave Chinese soil to be considered exports, a status they receive when they enter a bonded warehouse or factory that processes cathode into finished products for export only, and duty is paid.

The delivery for bonded warehouses in Shanghai is expected to attract bookings from Chinese importers who can re-import the cathodes with lower premiums than metal offered from Japan and Chile, traders said.

Chile's Codelco offered premiums ranging from $98 to below $105 per tonne for 2013 term shipments to China, while Japanese premiums were around $85.

"Major smelters are offering premiums mostly in the range between $70 and $80," said a manager at a large Chinese smelter.

"Our logistics costs are lower, so we can do lower premiums," he said, explaining the difference from the Codelco and Japan premiums.

The manager, who did not want to be named as he was not authorised to talk to the media, gave no figure for exports planned by his smelter next year.

"We have signed some export contracts. We are still talking to other buyers," said a trader at another large smelter that is increasing sales to export-oriented factories for 2013 term shipments.

Several sources said the smelters were in talks with Asian end-users and international trading houses for 2013 exports and some cathode was already booked for Taiwan at a premium of about $75 per tonne on a CIF basis.

That was less than the $85 premium offered by Codelco and $80 by a global producer and an international trading house for 2013 term shipments to Taiwan, traders said.

"Smelters' exports are most likely to have impact in the southeast Asian markets," said a purchasing manager for a large copper end-user in China. But China would suffer smaller impact because its bonded warehouse stocks were already high, he added.

Smelters may have signed export contracts for a total of 150,000 to 200,000 tonnes of cathode for 2013, he estimated.

INCENTIVE

China adjusted a tax in July, cutting export costs for seven large smelters, making exports more attractive and prompting them to begin signing yearly contracts for 2013.

"We are trying to sign term export contracts this year. The exports are aimed to improve the price gap between Chinese prices and LME prices," the trader at the second smelter said.

Among the seven smelters is Jiangxi Copper , China's top producer of refined copper cathode. It has already ramped up spot exports since July and will increase outflow next year, a company official has said.

Record bonded stocks of more than 1 million tonnes of cathode in China are also spurring smelters to look abroad, as they are expected to squeeze domestic prices soon.

China's exports of refined copper in the first 10 months of the year surged 47.9 percent on the year, to 227,552 tonnes. (Reporting by Polly Yam; Editing by Clarence Fernandez)

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