Copper Cathode Surplus:
Depends where you are ... By Ben Kilbey, Platts Deputy Managing Editor, Metals
IF YOU’RE LOOKING for a copper cathode surplus in Europe, you’d better look elsewhere. 2013 was the year that analysts cried out for a surplus of refined material. So far in 2014, it’s hard to find – in Europe at least. Looking at China, it’s a different story. Exchange
stocks, as well as off-exchange, have continued to build in early 2014. China’s copper stocks rose 2.2% to 198,286 mt in Shanghai Futures Exchange-registered warehouses (February 28th
to latest data at the time of this writing. This was the seventh consecutive week of increase. Turning to Europe – Rotterdam, specifically, where Platts bases one of its assessments – and stocks stood (February 28th)
since December 2, 2013. Go back roughly a year to March 6, 2013 and stocks stood at 14,625 mt. Forget cathode – or refined material – for a minute. In
reality, where there is real surplus is at the concentrate level. This is evident in treatment and refining charges (TC/RCs), or the costs miners have to pay smelters to transform concentrate into metal.
... the likelihood is that the copper market is roughly balanced this year
In January 2013 TC/RCs were pegged around $80/mt and 8 cents/lb, they are currently around $100/mt and 10 cents/lb in the spot market. The more concentrate in the market the higher the smelters’ charges. China imported 1.04 million mt of copper ore and concentrate in January this year, up 36.7% from January 2013, but unchanged from December 2013. It’s clear China has plenty of concentrate and a solid
quantity of exchange-registered material, but there is another side to the story – bonded stocks. These stocks have recently been estimated to be anywhere between 600,000-1 million mt. Citibank analyst David Wilson recently wrote that
from the 550,000 mt market estimates at the end of 2013, volumes of metal held in the Shanghai-bonded network are now estimated to have risen to between 650- 700,000 mt in early February. “Shanghai-bonded inventory is generally taken
by many analysts and market commentators as representative of total Chinese bonded copper inventory. However, we believe the bonded volumes have been built up in a number of other Eastern seaboard ports such as Guangzhou, Ningbo, Lianyungang, Rizhao, Qingdao, Tianjin, and Dalian. Indeed, we believe there could be
2 March 2014
an additional 300,000 mt of copper sitting in bonded warehouses in these other ports, which would suggest there is currently up to 1 million mt of refined copper in China’s bonded warehouse network,” Wilson added. Current premiums are a good indication of the disconnect between China and Europe. At the time of this writing (February 28th
) Platts’ European premium ) compared with the prior week, according
assessment for Grade A CIF Rotterdam was set at a range of $110-130/mt plus LME cash. A year ago the premium level was around $50-60/mt, plus LME cash. “With Chinese demand for copper remaining strong
at 2,500 mt, pretty much unchanged
through 2014, supported by real and financial demand, and numerous disruptions to the supply chain – from various factors – the likelihood is that the copper market is roughly balanced this year. Real consumption has started 2014 in mixed fashion,
robust in Europe, choppy in the Americas and obscured in China but should gain in momentum through 2014. Q2 in particular stands to be tight,” said one sell-side source. Smelter capacity in China is starting to come on line,
with one analyst estimating that over the course of the next year one million mt of additional capacity will be available. “What is needed to lure refined metal out of China?
With LME spreads tightening further in recent days – cash-to-3 months moving to a $60-65/mt backwardation – the market is focused on how long cathode tightness can be sustained,” according to JP Morgan analyst Colin Fenton. He noted: “To incentivise exports of refined units out of China and into the international market some combination of a larger LME backwardation and lower- bonded premiums (currently $150/mt) is needed.” So the reality is, that there is a surplus of copper, dependent on what location you’re in and at what level of the fabrication process your business sits. For now, most physical traders are sold out of cathode
units in Europe. Still, with spreads tight, the expectation is that the second half of 2014 could see material starting to arrive in Europe and premiums coming off the boil. It appears to be shaping up to be a year of two halves
for the European copper cathode market balance. •
Ben Kilbey is Deputy Managing Editor, European Metals with Platts.
T: +44 (0) 20 7176 6181
E:
ben.kilbey@
platts.com www.platts.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76