Pan Pacific Copper to Cut Ingot Premium by 32% for China

Japanese largest copper smelter, Pan Pacific Copper concluded long term copper ingot price negotiation with Chinese buyers to reduce the premium to US$ 75 per tonne for 2009 shipment, which is 32% lower than US$ 110 for 2008. They followed the trend after Corporaci?n Nacional del Cobre de Chile (CODELCO) reduced the premium to US$ 72-75. Pan Pacific Copper’s contract supply volume decreased from 2008. However, Chinese demand is apparently firm when Pan Pacific Copper’s shipment including spot sales in January is same level as 2008.

CODELCO reduced the premium by around 30% to US$ 75 per tonne for Chinese buyers for 2009 from 2008 while the supplier apparently agreed with some buyers to reduce the premium to US$ 72. The premium reduction indicted weak Chinese demand.

However, Chinese firm demand supported operations of Japanese smelters, which kept high level production to December while they started production cut in January. Chinese buyers inquired the offer of Japanese smelters in January when copper price at London Metal Exchange was lower than Shanghai market. Japanese copper industry expects Chinese 4 trillion yuan of government expenditure could lift the demand after Chinese New Year.

Japanese smelters start price negotiation with domestic buyers while the smelters couldn’t start the talk when the buyers couldn’t figure out how many the buyers would purchase for the year. The price is expected to decrease when CODELCO’s premium decreased by US$ 37 to US$ 65 per tonne for CIF price to Yokohama in 2009 from 2008.