BLBG: Copper Premium on LME Climbs to Two-Year High as Firm Dominates Stockpile
The copper premium for immediate- delivery on the London Metal Exchange climbed to the highest level in more than two years as data showed one unidentified company owned most of the stockpiles monitored by the bourse.
A company held between 50 percent and 79 percent of LME copper stockpiles from Nov. 22 through at least Nov. 26, the latest exchange data show. The cash contract advanced to a premium of $60 a metric ton over the benchmark three-month delivery yesterday, the highest level since October 2008, signaling less supply in nearby futures.
“Someone appears to have been trying to squeeze the market,” Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul, said today by phone. “This may help push the three-month price higher.”
Inventories of copper, used in everything from laptops to jetliners, shrank this year as demand recovered, pushing prices to a record $8,966 a ton on Nov. 11. Global demand will outstrip production by 250,000 tons next year, the first shortage since 2007, according to Royal Bank of Scotland Group Plc commodity analysts led by Nick Moore.
Stockpiles of copper monitored by the exchange have declined 29 percent this year to 355,750 tons, the lowest level since October 2009. Canceled warrants, or the amount booked for delivery out of the warehouses, rose to 32,275 tons from 2,625 tons at the beginning of this year.
Exchange Rules
Under LME rules, a firm holding 50 percent to 79 percent of the deliverable stockpiles has to provide the metal to buyers at no more than 0.5 percent of the cash price for a day. Liz Milan, managing director for LME Asia in Singapore, declined to comment.
The borrowing fee for next-day delivery, the so-called tom- next spread, was at a discount of 50 cents per ton per day at yesterday’s close, unchanged for the past three trading days. An increase in the fee would indicate tightening supply.
One unidentified company also held between 50 percent and 79 percent of nickel stockpiles as of Nov. 26, and another had 80 percent to 89 percent of aluminum alloy inventories, LME data show. Stockpiles of nickel total 130,866 tons and of aluminum alloy 71,460 tons, according to the exchange.
Last year, an unidentified firm held more than 90 percent of tin inventories in LME warehouses during the second half of the year, causing the cash price to trade as high as $200 a ton over the benchmark three-month contract on Aug. 13.
The three-month copper price added $60, or 0.7 percent, to $8,420 a ton at 3:29 p.m. Singapore time today, taking this year’s advance to 14 percent.
New York copper for January delivery traded at $3.8395 a pound today, about the same as the most-active March contract at $3.8435. Near-dated contracts mostly traded at a discount to more distant ones on the Shanghai Futures Exchange.
To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net or; Jae Hur in Tokyo at jhur1@bloomberg.net
To contact the editor responsible for this story: James Poole at Jpoole4@bloomberg.net
