LME WEEK: Codelco targeting higher 2014 contract premiums, ceo says

Codelco is still in discussions with its customers over premiums for 2014 copper cathode supplies, but its ceo said an increase from previous levels is the Chilean producer’s key target.

“We don’t discuss our negotiations publicly. But clearly there’s an increase over last year’s level. If you look at what’s been happening over the last couple of months, there’s been quite a significant increase over those levels discussed last year,” Thomas Keller told Metal Bulletin.

“That’s not only in Europe – what we’re witnessing in terms of actual premium levels being recorded in the spot market, including in Asia,” he added.

His comments follow the announcement last month by Germany producer Aurubis that it had offered customers in Europe a premium of $105 per tonne ex-works for copper cathodes to be supplied in 2014.

That is a rise of $86 per tonne from last year.

“I think what has been said [about the Aurubis premium level] is more in line with current market conditions – one shouldn’t be surprised,” he said.

“It’s higher than last year, clearly, but my feeling is that it’s much more in line with what have been market conditions throughout the year.”

Last year, Codelco agreed European premiums of $85 per tonne for 2013. European customers of Codelco told Metal Bulletin earlier this week that the company plans to offer a premium of $112 per tonne, $7 per tonne higher than Aurubis.

Keller said that while warehouse queues have been widely attributed as being a key reason for higher spot premiums this year, in reality their role is limited “because warehousing practises have been around for a long, long time.”

“I think the higher premiums are down to other causes, for instance a lack of scrap availability. Also more important is the fact that clearly there’s a more than usual disconnect between where demand currently is and where stocks are. Freight costs are high, if you have to move material over longer distances,” he said.

“Even more important, it’s clear that additional concentrate is coming into the market, and it’s going to take time to result in actual cathode availability, because it has to fill the pipeline system. Those three reasons are more important to explain premium levels more than anything else,” he added. 

Andrea Hotter
ahotter@metalbulletin.com
Twitter: @andreahotter