Codelco to maintain high long-term contract premiums for Chinese buyers in 2021

SHANGHAI, Oct 19 (SMM)—The market expects Codelco to decide premiums under long-term contracts at above $80/mt for Chinese buyers, which is likely to reduce long-term contracts signed by Chinese buyers.

Shipments to China under long-term contracts in 2020 stood at $88/mt. However, the average premium for imported copper stood at $66.51/mt as of October 15. Chinese buyers would sign long-term contracts even at high import premiums in order to maintain long-term works with overseas smelters and secure supply, but reduce the volume of long-term contracts and sign small orders in the next year. Trades of imported copper were brisk in Q2 when the import window opened for an extended period, bolstering Yangshan copper premiums to a high of $113.5/mt under warrants and $102.5/mt under bill of lading. The import market weakened noticeably in Q3 as the SHFE/LME copper price ratio plunged. Yangshan copper premiums slumped and hit the lowest for the year in late September amid oversupply.

Yangshan copper premiums are expected to trend higher but are unlikely to reach $80/mt amid the absence of domestic consumption improvement and the production rush at domestic smelters. As of October 15, Yangshan copper premiums were quoted at $48-60/mt under warrants and $38-52/mt under bill of lading. The quotation period is in November.

Codelco is likely to set premiums in 2021 under long-term contracts at $98/mt for European buyers, flat from 2020.