Cu Ingot Contracts Still Not Fixed for 2009 Shipment, Japan

Japanese copper smelters and ingot consumers, mainly electric cable makers and copper alloy product makers, haven’t agreed in the long-term ingot contracts for 2009 shipment. The negotiations are delayed when copper users cannot fix the contract volume with unforeseeable demand conditions along the global economy recession. Smelters are likely to decrease the premium by around US$ 37 per tonne for 2009 after CODELCO of Chile lowered its premium against Japanese ingot consumers by US$ 27. However, the conclusion won’t realize soon over the contract quantity problem.

Japanese copper smelters started the negotiations with overseas ingot consumers on the long-term supply contracts for 2009 shipment. A smelter source said few contracts have been concluded so far. In usual years, Japanese smelters finish the long-term supply contracts with offshore consumers by December and with domestic users within January. This year, smelters cannot fix the contracts even with overseas customers yet.

Copper consumers cannot decide the purchasing volume for 2009. Offshore copper users are said to stop ingot procurement by the end of Chinese New Year holidays at earliest. Some consumers are likely to utilize stocks procured within 2008 by March 2009. Under the situations, some overseas customers have contracted copper ingot with Japanese smelters for only March-December 2009.

In the case with domestic consumers, Japanese smelters start ingot delivery in January every year regardless of whether the long-term contracts are concluded or not. Fixed price is retroactive to the timing of contract conclusion. Japanese major smelter source said this-year shipment volume is lower by 10% in January from a year earlier.

Meanwhile, Japanese smelters are likely to decrease the premium for 2009 that smelters put on copper price at London Metal Exchange. CODELCO of Chile set its premium for 2009 shipment at US$ 64 per tonne for South Korea and at US$ 65 per tonne for Taiwan, the indicator and lower by 35-36% from 2008 shipment. CODELCO also lowered the premium against Japanese ingot users by US$ 37 or 36% to CIF US$ 65 for Yokohama port arrivals (CIF US$ 79 for Nagoya, Osaka and Kobe arrivals).