Copper Fees Climb in Shanghai as Metal Seen Moving to Malaysia

Copper premiums in China jumped to the highest level in more than a year after companies shipped metal to warehouses in Malaysia because of incentives offered by operators there, according to researcher CRU.

Buyers are paying an additional fee of $60 a metric ton to $90 a ton for metal in Shanghai, the most since February last year and more than $55 to $80 two weeks ago, said Wan Ling, a Beijing-based manager for China non-ferrous metals, in an e-mailed reply to questions. Reserves tracked by the London Metal Exchange in Johor, Malaysia, are at a record high, exceeding Korea, previously the top Asia location, LME data show.

“We did hear that a few companies are shipping copper metal to other warehouses outside China,” said Wan, who has spent more than six years monitoring base metals for the London-based researcher. Warehouse operators in Malaysia are providing an incentive of $100 a ton, Wan said.

Stockpiles monitored by the LME in Malaysia are 117,225 tons, compared with 12,825 tons in December and represent 20 percent of global inventories of 562,475 tons, LME data show. Inventories in Korea total 86,250 tons. Reserves at so-called bonded warehouses in China fell about 100,000 tons to 755,000 tons in the past three months, Wan said.

Copper premiums in China, the largest user, are charged on top of LME cash prices and partly cover insurance and freight costs. Refined copper stockpiles monitored by the Shanghai Futures Exchange have increased to the highest in at least a decade, bourse data show.

Visible Inventories

“A large chunk of incremental metal at LME warehouses should not reflect additional supply but a shift of inventories that became visible,” said Dominic Schnider, head of commodity research at UBS AG’s private bank unit in Singapore. “The underlying demand story is not great at the moment.”

China’s refined copper exports rose 47 percent to 38,569 tons in February from a month earlier and compared with 700 tons a year earlier, according to customs data published yesterday. Shipments totaled 132,023 tons in the past six months. Imports declined 12 percent in February from a month earlier and were down 43 percent from a year earlier, data show.

There are 22 LME-registered warehouses in Johor and most are operated by Pacorini Metals (Asia) Pte Ltd., a unit of Glencore International Plc, and Goldman Sachs Group Inc.’s Metro International Trade Services Ltd., according to LME data.

Glencore spokesman Charles Watenphul in Baar, Switzerland, and Sophie Bullock, a Goldman spokeswoman in London, declined to comment. Other warehouse owners including C. Steinweg Handelsveem BV, JPMorgan Chase & Co. and Noble Group Ltd. also declined comment.

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