BEIJING: Premiums for term shipments of refined copper cathode to China are likely to drop further in 2016 after falling this year, hit by fears over slowing growth in the world’s No.2 economy and as appetite for using the metal as collateral on loans fades.
Premiums, paid by Chinese importers to overseas suppliers to secure physical metal, are set over the cash London Metal Exchange copper price and reflect importers’ demand forecasts.
Term premiums for 2015 were set at $133 a tonne for metal from Chile’s Codelco and $115 from Japan, down 3.6 percent and 6.5 percent from the previous year respectively. That was after some buyers cut bookings due to worries over credit from banks and concerns over China’s economic outlook.
“Lower term premiums in 2016 are certain. The issue is how low they will be,” said a trader at a Western supplier, declining to be named as he was not authorized to speak to media. Premiums are expected to fall by at least $10 from this year in 2016, with a range of $115-$125 expected for metal from Codelco and about $100 for copper shipped from Japan, said traders and end-users.
Demand for copper has not picked up strongly this year, raising fears that Beijing’s measures to boost the economy would take some time to drive up demand, they said.
China’s refined copper imports fell 8.8 percent from a year ago in the first 7 months of this year.
