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Ripple effects from US and EU sanctions against Russia are appearing in the copper rod markets, with a slowdown in imports of Russian material into India leading to a jump in premiums.
Premiums for Russian copper rod in the Indian market have soared to $210-225 per tonne cif Nhava Sheva from $160-180 per tonne cif at the end of July, with one trader confirming he had recently done a small parcel of Russian copper rod at $220-225 per tonne Nhava Sheva cif.
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Premiums have increased as Indian market participants reported that some banks are refusing to remit dollar payments due to the US and EU sanctions, leading to a slowdown in imports of Russian material.
Seasonal factors, such as the monsoons in India, have also exacerbated the situation.
“Some dollar payments from Russia through banks are getting refused due to the Ukraine and Russia conflict,” an Indian trader, who imports Russian copper rods, told Metal Bulletin.
Imports of Russian copper rods into India are slowing as a result, he added.
Although Russian metal companies have not been directly sanctioned by the USA and the EU, and the likelihood of such sanctions remains low, the knock-on effects of more Russian banks being sanctioned are being felt in metals markets.
“When handling TT [telegraphic transfer] payments, we are careful not to transfer to Russian banks that have been sanctioned,” a banking source told Metal Bulletin.
“We don’t want to take any risks and hence are being ultra-conservative,” the banking source said.
He added that his bank was still making US dollar payment to banks in Russia that were not on the US and EU sanctions list, pointing out that there is not a blanket ban on business with Russia.
But at least three traders told Metal Bulletin that they were having difficulties getting banks to pay for Russian copper rods into India.
Middle East-origin material in the Indian market, which generally trades above the level at which Russian rod is bought and sold, is selling at premiums of $250-260 per tonne cif Nhava Sheva.
Russia lifts export duty Meanwhile, market participants are waiting to see the full effects of Russia’s move last month to lift the 10% duty on copper cathode exports.
Some market participants believe that with exports of copper rod and copper cathode receiving the same duty, Russian rod producers may shift their focus to produce more cathode.
Higher volumes of copper cathode in the market will put premiums under pressure, while also pushing premiums for Russian rods and those from other producers such as the Middle East and Europe, higher.
The strain will be most keenly felt by the Middle East, which is one of the largest consumers of Russian copper rods.
The Middle East produces about 600,000 tpy of copper rod and imports about 200,000 tpy from both Russia and Europe.
“Whatever the situation, there will definitely be an increase in Russian premiums and there will be shortage of Russian rods,” a Middle East rod producer said.
Concerns about rod supply have led customers to approach rod producers earlier than the traditional November-December period.
“Big customers want to do contracts earlier. Their concern is quantity for next year, not the premium,” a copper rod producer said.
Market participants will be following the copper cathode premium negotiations that will begin in London during London Metal Exchange week next month and are signed around CESCO copper week in Shanghai in November.
Annual contracts for rods follow the deals struck for copper concentrates and cathodes.
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Shivani Singh shivani.singh@metalbulletinasia.com Twitter: @ShivaniSingh_MB