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Copper smelter hits cause physical squeeze in Asia
2018-10-17

Oct 17 (LTIT) - The copper market is currently experiencing a squeeze on physical metal which is unexpected.

 

The London Metal Exchange (LME) price is treading water just above the $6,000 level, struggling to fend off bearish macro funds.

 

Mine supply is doing just fine with a conspicuous absence of disruption this year.

 

Yet, all the tell-tale signs of physical market tightness are there.

 

Global exchange stocks have been falling in near unison since April. Between them the London Metal Exchange (LME), COMEX and the Shanghai Futures Exchange (ShFE) hold 440,000 tonnes of copper, the lowest amount since June 2016.

 

Physical premiums are rising. The spot premium in Shanghai <SMM-CUYP-CN> is $117.50 over the LME cash price. The last time it was above $100 was also in 2016.

 

Producers such as Chile's Codelco and Germany's Aurubis have announced hefty hikes in premiums to $98 and $96 respectively for European shipments next year.

 

And Chinese imports of refined copper are booming, up 16 percent in the first nine months.

 

Which is a clue that this scramble for physical copper is centred in Asia, where trade flows are adapting to a combination of smelter outages and changing scrap dynamics.

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