Premiums Indicate ‘Softness’ in Copper Market, Macquarie Says

Premiums added to metals prices indicate “softness” in the copper market and are “fairly firm” for aluminum, Macquarie Bank Ltd. said.

A drop in copper premiums was particularly “pronounced” in China, Macquarie analysts including Max Layton in London said in a report dated March 11. Buyers in the country, the world’s largest copper consumer, have been holding back as a result of record-high prices and tighter credit conditions while continuing to run down stockpiles, they said.

“This softness in physical copper premiums is clearly inconsistent with recent record-high exchange prices and is one of the key reasons that we expect to see continuing softness in the copper market in the short term,” the analysts said.

Much stockpiled aluminum is “tightly held in storage- financing deals,” making it less easily available to consumers, Macquarie said. “Off-exchange” inventories are shrinking, according to the bank.

“The tightness that end users experience in the market currently is supporting aluminum premiums,” the analysts said. The premiums are fees for delivery to a particular location added to London Metal Exchange prices.

Physical premiums for zinc in Europe and the U.S. rose in recent months, while premiums in Asia show signs of “some softening,” with China in particular reported to be quiet, according to Macquarie. (Bloomerg)