Copper supply is the highest in at least seven years, according to Bob Kickham, senior vice- president for procurement at Luvata, the maker of copper parts used in items such as fridges and wind turbines.
“We’ve seen a very good availability of copper in the market,” Kickham said in an interview on March 1. There is “more available copper on the market than we’ve seen at this time in the seven years I’ve been in the industry. Typically the first quarter is a time when there is a lot of copper around, but there is even more copper around this first quarter.”
Refined copper supply will expand 3.4 percent to 20.8 million metric tons this year, exceeding demand by 56,000 tons, according to a Barclays Plc. report on Feb. 15. Copper stockpiles in warehouses monitored by the London Metal Exchange have more than doubled since October and are at the highest since Oct. 10, 2011. Luvata buys about 200,000 tons of copper each year on a one-year basis and on the immediate-delivery market, according to Kickham.
Brentford, England-based Luvata, whose customers include Siemens AG (SIE) and Samsung Electronics Co., will be buying more copper this year than in 2012, Kickham said at the company’s headquarters. Asia accounted for 37 percent of Luvata’s sales last year, while the Americas made up 35 percent, with the remainder in Europe, according to the company. Copper producers will add 646,000 tons of mined supply this year, amounting to 3.8 percent growth, Standard Bank Plc estimates. Output grew 4.3 percent last year, according to the bank.
“We took a view that there will be an oversupply in the market and therefore we have an appetite for spot material,” Kickham said. “We have some material to buy and we’ll buy at spot and we will be advantaged in that spot price.”
The premium added to the price of the metal for immediate delivery on the LME was quoted at as low as $55 a ton in February, from a median $80 a ton in January, according to traders. Codelco, the world’s largest copper producer, cut the premium charged to European buyers this year to $85 a ton, while Aurubis AG (NDA), the second largest, offered copper at a premium of $86 a ton.
Copper inventories in LME-tracked warehouses climbed for a 13th session to 462,400 tons, data showed today. Stockpiles have swollen on deliveries in New Orleans, the Belgian city of Antwerp and Johor, Malaysia. Further increases will depend on the sort of incentives warehouses offer to attract metal under their sheds as well as the oversupply, Kickham said.
“We are seeing it grow up to 500,000 tons,” Kickham said. It will be interesting to see how quickly it gets there and how much further it goes, he said.
New Orleans, Antwerp and Johor account for 68 percent of the global LME inventory as of today, and are locations affected by long waits for metal, according to Credit Suisse Group AG.
“It’s strange when you see warehouses paying very large premiums to get stuff to sit behind queues,” Kickham said. “That has a potential to distort this natural underlying balance.”
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