Codelco, the world’s largest copper producer, will probably reduce the premium charged to Chinese buyers for a second year as increasing domestic production lowers demand for imports.
The fee may drop to $100 a metric ton in 2013 from $110 this year, according to the median of 11 estimates from executives, analysts and traders compiled by Bloomberg. The amount is added to the price of immediate-delivery copper on the London Metal Exchange to cover costs such as shipping and insurance. Codelco cut the fee to $85 from $90 for European clients, said two people with direct knowledge of the matter.
Imports by China, the world’s largest user, are set to fall next year as smelting and refining capacity rises, outpacing growth in consumption, according to researcher Beijing Antaike Information Development Co. Goldman Sachs Group Inc. cut its 12- month forecast for copper by 11 percent to $8,000 per ton from $9,000 because of slowing Chinese demand, it said Oct. 15.
“There’s no doubt the premium will drop,” said Wang Yuemin, an analyst at data provider SMM Information & Technology Co. “Even if demand recovers a bit as expected, we have a huge inventory, not to speak of new production capacity in the pipeline.”
Copper for delivery in three months on the London Metal Exchange dropped 2.7 percent in the past year as the slowest growth in China since 2009 and Europe’s sovereign debt crisis cut demand. The metal fell 0.7 percent to $7,613.25 at 5:43 p.m. Shanghai time.
Aurubis AG (NDA), the second-largest refined producer, cut the premium for buyers in Europe by $4 to $86 a ton in June. The Hamburg-based company will keep the fee at that level next year to support demand, Michaela Hessling, a company spokeswoman, said on Oct. 8. Pan Pacific Copper Co. in Tokyo offered $85 a ton to Chinese clients in 2013, $15 lower than this year.
China’s consumption of refined copper is forecast by Antaike to rise to 8.1 million tons in 2013 from 7.68 million tons this year, while output may increase to 6.1 million tons from 5.6 million tons. That leaves a deficit of 2 million tons next year versus 2.08 million tons.
“With a comfortable bonded warehouse inventory buffer, we think that it will take attractive pricing to result in similar tonnages being booked,” Barclays Plc said in a report on Oct. 22, referring to Codelco sales. Refined copper purchases by China jumped 50 percent from a year ago to 2.68 million tons in the first nine months, according to customs data.
Smelters face oversupply with stockpiles in Shanghai bonded warehouses estimated at 600,000 tons to 700,000 tons, according to Richard Wilson, chairman of metals at Wood Mackenzie. Spot premiums in Shanghai, including insurance and storage costs, have slumped 65 percent to about $45 from the end of 2011, according to Metal Bulletin data.
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