European Copper Warrants Offers Hold Steady on Contango, China


". . .anyone who wants metal will have to pay prices to compete with international demand. . ."

European copper warrants remained quoted at high numbers this week, dictated by activity in China rather than demand levels in the region. The London Metal Exchange copper contango also meant holders of metals were not under any pressure to sell, sources said.

"This is not a charity, it's a business," a UK-based trade source said, adding that if someone needed metal, they would have to pay the numbers that were being dictated by demand levels in China.

"If you have cathode you'd want to sell it at the highest price. When the market in China is not hot you might be willing to sell to a European consumer lower, but while it's strong, anyone who wants metal will have to pay prices to compete with international demand," he said, adding that those holding metal were happy to do so as the contango covered financing and rent and when the LME/Shanghai Futures Exchange arbitrage returned, they would be able to sell that metal into Asia.

"As long as there is a contango, you can keep it anywhere—on-warrant, off-warrant or on the water; you just keep rolling your short LME position until it makes sense to sell," the trader said. He said any producers who could were diverting tonnages to Asia and delivering to warehouses in Asian locations like Korea so when the arbitrage became favorable again, the metal would be close by.

The first trade source said standard grade metal should be fetching strong premiums as there was very little scrap around, which would be promoting the purchase of cathode, but conceded he had not heard any bids or offers for it.

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