* Premiums rally 50 pct in a month, near $100/T in Rotterdam
* Copper stocks soar in Trafigura's logjammed Antwerp sheds
* Chile port strike, tight scrap add to pressure
By Maytaal Angel
LONDON, March 28 A move by commodity trader
Trafigura to ramp up rental revenues by drawing Europe's spare
copper into its warehouses in Antwerp has combined with a
Chilean port strike to push Europe copper premiums near
Premiums are paid above the London Metal Exchange cash price
to cover delivery costs including transport and
insurance but also serve as an important indicator of supply
demand dynamics on the ground.
"Premiums are up in part because of competition from
warehouse companies. It's the cumulative effect over a period of
time of mopping up the unallocated units in the market,"
Macquarie analyst Duncan Hobbs said.
Trafigura warehouse unit NEMS has for some months been
offering incentives of around $100 a tonne above the LME cash
price to draw copper into Antwerp, capitalising on a multi-month
backlog there that assures it lucrative rental
Despite this squeeze on supply, copper premiums in nearby
Rotterdam remained depressed until recently, when a potential
supply shortfall from top exporter Chile and a decrease in scrap
supply in Europe added to pressures in the market.
"The situation in Chile might intensify, the Russians are
shipping less, scrap is not available. I don't know where people
will get the metal from unless they come to us, in which case it
will be even more expensive," a Europe-based copper merchant
Industry sources say premiums for grade A copper on the spot
market in Rotterdam have risen some 50 percent in the space of a
month. They are currently trading at $80 to 100 a tonne versus
$50-70 at the end up February.
LME data show that since Jan. 2, copper stocks in Antwerp
have risen by 160 percent to account for some 83 percent of all
copper inventory in LME-approved warehouses in Europe, making it
effectively unavailable to the market.
Also nudging premiums higher, financing deals that tie up
copper as collateral have become more attractive to some
investors, allowing them to cover the cost of holding metal
while they wait for premiums to rise.
Such deals work by taking advantage of a market spread known
as contango, in which cash prices are cheaper than futures
prices . They are profitable when the spread is wide,
money is cheap and warehouse rents are low.
"Financing deals are not a big concern right now because
there is enough copper around, but if the tightness in scrap
continues, then of course any seller will look for a higher
premium," a source at a European copper consumer said.
His concern may be premature, however.
As of April 1, changes to LME rules will force backlogged
warehouses such as those in Antwerp to release much more than
the current minimum of 3,000 tonnes a day after that minimum
requirement was widely criticised for exacerbating queues for
Industry sources say the new rule may lessen the logjam in
Antwerp in particular.
"I don't see (copper) premiums going much higher. It's
possible for warehouse companies to offer higher incentives. but
LME rule changes take effect next week, which will potentially
improve access," Hobbs said.