UPDATE 2-Aurubis offers 2014 copper cathode premium at $105/t
* Aurubis seeks $19 increase for 2014 term premium
* Traders expect Codelco to raise premiums to $135-140
By Harpreet Bhal
LONDON, Sept 25 (Reuters) - Aurubis, Europe's biggest copper smelter, will offer 2014 copper cathode term premiums of $105 per tonne for European customers, a spokeswoman said on Wednesday.
The premium, paid above the London Metal Exchange (LME) cash copper price to secure physical material, is up $19 compared to the firm's 2013 term premium, and not far from spot premiums in Europe of around $100-$140 a tonne.
Traders said Aurubis' premium hike raises the chances that Chile's Codelco, the world's top copper producer, would also ask for higher premiums for Europe next year when discussions take place during LME Week in October.
Term premiums are typically negotiated between suppliers and consumers for long-term contracts.
Traders said Codelco's premiums, seen as the industry benchmark, could rise to around $135-140 next year, from $85 a tonne this year, as optimism gathers pace that a recovery in the global economy will translate into better demand for the metal used in power and construction.
"The general mood in the market is improving and people are more optimistic than... a year ago," a Europe-based copper trader said.
"The current level of premiums is a bit high if you consider real demand at the moment. But having said that, people believe a recovery is coming next year and that is fuelling optimism even if we expect more supply to come on stream next year."
Japanese copper smelters have proposed a 45 percent rise in the premiums they want to charge Chinese end-users for term deliveries next year on expectations of rising demand.
However, more supply is expected to enter the market next year including from Rio Tinto's giant Oyu Tolgoi mine in Mongolia.
A Reuters poll in July showed analysts expected the copper market to register a surplus of 368,500 tonnes next year.
Premiums on the spot market in Europe have risen steadily to $100-140 from around $80-100 in April, while in China premiums are even higher at about $180-190 a tonne.
The premium covers the cost of freight and insurance, and reflects regional demand and supply.
"Premiums in China are still higher than in Europe, so consumers are comfortable paying these levels. I expect people will be comfortable doing their longer-term contracts at around these levels," another physical trader said.