SINGAPORE, Aug 02, 2011 (Dow Jones Commodities News via Comtex) -- Copper premiums have fallen in Shanghai in the last fortnight as high prices on the London Metal Exchange limit physical demand for the red metal.
Premiums stand at $70-$100 a metric ton basis cost, insurance and freight, market participants in China and Singapore said, although they conceded most business has been booked at the $70-80 level. This compares with premiums between $100 and $120 in mid-July.
Three-month copper prices on the LME are up 3.5% since the start of last month despite seasonally lower Chinese consumption, and the aggressive rally is deterring those consumers who do need to come into the market to buy metal, traders said.
"The high price is of course to blame for the slide in premiums and volumes," said a Singapore-based trader.
Three-month copper opened at $9,689/ton Tuesday compared with $9,375/ton at the start of July. Prices have surged on renewed fund interest and strong speculator buying that has defied the usual third-quarter slowdown, traders and analysts said.
"We have been surprised how resilient copper has been for the last two months," said a Hong Kong-based analyst, forecasting that large-volume consumption is unlikely to pick up before the start of October.
Those consumers who are buying at high levels only come into the market when prices are falling, and they buy only small tonnages, a second Singapore-based trader said. "They don't want to buy at these levels - it's only when the price is coming down and then they're buying just one lot," she said.
The weak seasonal demand is evident in the slowdown in stock draws from LME-bonded warehouses, with inventories up 0.6% on-month at 466,025 tons. Cancelled warrants -- a proxy for metal about to leave warehouses -- stand at 2.88% of stocks compared with 4.57% a month ago.