* Offers made in early negotiations for 2014 contracts
* More metal seen booked on contract next year
* Rise comes even as analysts see surplus next year
By Josephine Mason
MIAMI, Nov 13 Some copper producers have asked
U.S. customers to accept a 75 percent increase in premiums for
2014 contracts as strong demand from China, the world's No. 1
consumer, has boosted prices there and tightened domestic
supplies, market sources said.
During initial talks at the American Copper Council meeting
this week, suppliers tabled an increase of 1.5 cents per lb for
premiums on a delivered basis to consumers in the southern
United States, traders, producers and consumers said.
That is the biggest rise in several years and would take
next year's premium to 3.5 cents per lb, compared with 2 cents
this year. Premiums are paid on top of the London Metal Exchange
benchmark for physical delivery of metal.
While the percentage rise is significant, the 1.5 cent
increase measured in dollars per tonne is about $30, which is in
line with the rise in premiums in China and Europe, sources
The contract premium is also still much lower than the spot
market, which is around 5 cents to 7 cents per lb.
Even so, such a big increase will be tough to stomach for
copper fabricators, which make electrical wire and plumbing
equipment, with some analysts forecasting the global
20-million-tonne market will be in surplus next year.
There are few signs of a significant improvement in
underlying real consumption either. The U.S. construction market
has shown tentative signs of growth, but many are worried about
a potential slowdown in demand from China.
Nicholas Snowdon, a base metals analyst at Barclays Capital,
expects term contracts to rise by 30 percent in 2014, even
though the market will swing into a surplus of about 200,000
tonnes from a deficit this year.
The main driver behind the U.S. increase, the biggest in
many years, is Chinese demand, which has tightened domestic
supply, market participants said.
"The upside surprise (this year) has been how strong Chinese
demand has been," he said.
He has adjusted higher his forecast for refined copper
demand growth this year to 10 percent from 6 at the start of the
Talks are likely to be complicated further by worries that
China's voracious appetite for imports does not reflect
While the world's second-largest economy continues to buy
copper to build its rapidly expanding infrastructure and housing
market, a big portion of the rising imports in recent months has
been used as collateral for short-term loans, according to the
That has bolstered spot premiums in Shanghai to around $190
to $200 per tonne from $175 to $200 in September.
These are early offers to kick off annual negotiations and
the final terms are likely to change.
End users are likely to push for a more moderate 1 cent
"The gap between what the consumers want and what they'll
get is still very wide," said a source at a big U.S. consumer.
IN A BIND
Consumers are in a bind though. With the spot market between
5 cents and 7 cents per lb, it might be better to secure
material and swallow the increase in annual terms than leave
themselves exposed to the spot market.
Spot premiums in the United States have surged almost 40
percent since November last year, largely because of tighter
supplies as more metal is shipped to China, where premiums are
More metal is also stored in warehouses outside of the
LME-registered network that charge less rent, creating the
perception of falling availability.
Copper stocks in CME Group Inc COMEX warehouses have
fallen 73 percent since May to just under 24,000 short tons,
their lowest since 2008.
Global LME stocks have fallen 30 percent to around 460,000