CODELCO to Raise Japan Cu Premium to US$ 98/t for 2011

Chilean copper giant, Corporaci?n Nacional del Cobre de Chile (CODELCO) notified to Japanese copper buyers to increase the Japan premium of copper ingot to CIF US$ 98 per tonne at Yokohama port for 2011 shipment, which is US$ 23 higher than 2010 premium. The premium apparently increases to US$ 98 for buyers in South Korea and Taiwan and the firm didn’t disclose the premium for Chinese buyers while the premium already settled at US$ 98 for European buyers in October.

CODELCO’s copper premium decreased to US$ 65 per tonne for Japanese users including electric wire and rolled copper makers in 2009 from US$ 102 in 2008 due to severe demand shrink after Lehman shock. The premium increased to US$ 75 in 2010 and US$ 98 in 2011.

Asian copper ingot supply has been tight since last year due to strong demand in China. Japanese smelters’ production cut also contribute to the supply condition when the smelters cannot increase the production under shortage of ore supply despite of the better domestic demand. Asian copper premium keeps US$ 100 per tonne at spot basis. Japanese copper smelter source said some buyers paid as high as US$ 150 of premium in summer.

However, the premium in 2011 is still lower than over US$ 100 per tonne level in 2008 when the supply gets less tight than before. Chinese traders reduce the transaction at London Metal Exchange when LME price is higher than price at Shanghai market. Recently spot copper premium apparently decreases to less than US$ 100 under slowing demand.

The premium was paid by the buyers on LME copper price. The premium is part of the profit for copper smelters and trading companies.

CODELCO notifies the next year’s premium to each user in Europe, Japan, South Korea, Taiwan and China in October depending on the each supply condition. Based on the premium, Japanese smelters settle the shipping price to contract users including electric wire and rolled copper makers.