CODELCO’s Cu Japan Premium to Rise for 2011

Corporaci?n Nacional del Cobre de Chile (CODELCO) will increase the copper ingot premium for Japanese users including electric wire and rolled copper makers for 2011 shipment from 2010, which increases for 2 years in a row. Asian spot premium keeps as high as US$ 100-120 per tonne under tight supply. The premium could reach US$ 100 for the first time since 2008.

The premium, which is paid on ingot price at London Metal Exchange, depends on supply and demand balance. CODELCO usually sets the premium for next year for each area in and after October depending on the supply balance in the market. The premium impacts on ingot price between Japanese smelters and major buyers. CODELCO reduced the premium to Japanese buyers to CIF US$ 65 per tonne to Yokohama in 2009 from US$ 102 in 2008. The firm increased the premium to US$ 75 in 2011.

Spot copper ingot premium reached US$ 100 per tonne in May and keeps the high level while the premium decreased to less than US$ 100 in April temporarily. Japanese smelter source said the firm gets strong order from Southeast Asia. The strong demand in Asia lifted the premium.

Japanese smelters cannot increase the export due to strong domestic demand. However, the demand could decrease in and after October when subsidiary for eco-friendly vehicle will finish by end of September. Japanese largest copper smelter, Pan Pacific Copper announced the production cut due to short supply of copper ore.

The tight supply of raw material could impact on the copper production. With lower domestic demand, copper supply balance would keep tight and premium would keep high level.