BRUSSELS, June 15 (Reuters) - Copper premiums in Europe are likely to stabilise at around $60-$70 a tonne for the rest of the year, as China is expected to import less material and as supply tightness eases, trading sources said.
In March, European copper premiums more than doubled from levels in early 2012, to above $90 a tonne, as consumers scrambled for material in a market tightened by a lack of available supply from producers.
Premiums have since dropped to around $70-80 a tonne over the London Metal Exchange (LME) cash price, as demand weakens as a result of a growing debt crisis in Europe.
"Earlier in the year, copper went to China and there was a shortage (in Europe). There was a peak in premiums of around $100 and that will stabilise," a source at a major European copper semi fabricator said on the sidelines of the Metal Bulletin copper recycling conference.
"I expect the premium to stand at around $60-70 towards the end of the year."
Demand from China, which accounts for as much as 40 percent of global demand for copper, is expected to stay soft in the coming months as the country's economy cools.
Reflecting tight supplies earlier this year, the premium for cash copper to three month material CMCU0-3 hit a high of $155 at the end of April, the steepest level since August 2008.
The situation has since eased, with cash copper trading at a discount of $14 to three-month material.
"The backwardation has disappeared and we are now in contango so there is less pressure on the market and we will see lower premiums," he said.
A physical trader in Europe said that while demand was still slow in Europe, parts of Northern Europe such as Germany was seeing stable demand and he expects overall demand in the region to pick-up in the second half.
"Demand is slow but we are getting good signals of recovery and we expect for the second half to see a recovery in the business," he said at the sidelines of the conference.
He said low supplies of copper scrap in Europe had resulted in smelters buying copper cathodes rather than scrap, offering some support for copper premiums.
"This situation (of tight scrap supplies) is probably temporary and won't last long. Supply could pick up in the coming weeks."