China’s top copper buyers expect a 36% cut in Codelco premium

Premiums set for physical delivery of copper are paid on top of the reference London Metal Exchange (LME) contract and are sometimes used as a benchmark for global contracts.

Codelco chairman Maximo Pacheco told Reuters last week that China remained an important market for the Chilean miner, accounting for 40%-45% of Codelco’s sales despite a restructuring of its sales strategy.

State-owned Codelco, the world’s largest copper producer, negotiated a premium of $140 a ton for this year, significantly above the Yangshan copper spot market premium which fell to $10 a ton in March and is currently at $69 a ton.

Codelco’s London office did not respond to requests for comment.

“It’s to do with fundamentals, the market is weak in China and shipping costs to Shanghai are cheaper than to Europe,” one of the sources said.

According to the International Copper Study Group (ICSG), the global refined copper market will see a surplus of 467,000 tons next year from a small deficit this year.

ICSG expects global refined copper supplies to total 27.534 million tons in 2024.

More metal going to China than to Europe and shipping lines competing for business is one reason why transporting copper to Shanghai is cheaper.

A separate source told Reuters on Monday that Codelco was offering to sell copper at a premium of $234 a metric ton to European customers next year – matching this year’s record.