Europe Cu: Markets gears up for 2020 contract talks

Spot copper premiums were unchanged in Europe over the past week as most market participants geared up for the upcoming annual contract negotiation after producers announced offers for 2020.

German copper producer Aurubis announced today that it will maintain its annual copper premium in Europe for next year. Aurubis' copper cathode premium for delivery in 2020 will be unchanged year on year at $96/t on an fca basis, the producer said.

This follows Chilean producer Codelco's annual premium offer of $98/t fca in September.

Consumers and producers will start their annual contract talks next week at the annual London Metal Exchange (LME) Week industry gathering. There is little spot trading activity ahead of the annual contract negotiation.

Weak demand and oversupply of scrap in Europe is likely to dominate discussions. Many European semi-fabricators have switched to using more copper scrap than cathode over recent years because of lower copper scrap prices compared to cathode. Scrap supply has been rising on the continent following China's scrap import restriction, leading to lower prices and more readily available material.

"European consumers using more scrap than cathode – that's been the case for a long-time, but the situation in China makes it worse," said one trader.

Amid little buying activity in Europe, the Argus weekly copper premium in-warehouse Rotterdam was assessed unchanged at $20-40/t today.

LME warrants for delivery in Rotterdam were traded at $5/t over the week.

The copper premium for delivered southern Europe material was flat at $45-55/t this week.

The three-month LME copper contract rose to $5,826/t today, up by 0.8pc from $5,780/t on 15 October.

On-warrant copper stocks fell to 189,525t today, down by 14,400t or 7pc from the previous week. Cancelled warrants increased by 9,775t or 13.8pc over the week to 80,825t on 22 October.