South Korean spot copper premiums have risen since late last year as demand for copper cathode from copper wire makers has recovered modestly after a two-year slump, traders said. The copper cathode import premium was quoted at around $120 per tonne over the cash price on the London Metal Exchange, up from $100-$110 in January.
"Now we're just starting to see some spot demand in the market for the first time since 2005," said a trader in an international metal house. South Korean buyers, who usually secure 80-90 percent of their copper through long-term contracts with suppliers, did not strike any spot deals last year as record copper prices hurt demand for their products.
Global copper prices, which hit a peak of $8,800 a tonne in May 2006, have more than doubled in the past two years helped by fund buying, strong global demand and supply woes.
Since then the metal, used in the construction, transport and power industries, has been knocked back to $6,200 a tonne due to an increase in stocks. "The position of copper wire makers, which had been hit by soaring prices and sharply reduced their output, seems to have stabilised this year," he added.
South Korean demand for copper cathode, used in the rod, wire and cable industries, fell to 786,000 tonnes last year from 823,000 tonnes in 2005 after hitting 910,000 tonnes in 2004, according to industry data. "A sharp rebound is not expected, but domestic copper demand may recover to 800,000 tonnes this year," said the trader.
However, traders said there was not enough physical copper in the spot market as China has more attractive spot prices. "The market is quite tight due to strong Chinese demand," said another trader.
"Even at higher premiums, few suppliers are interested in spot sales to South Korea because they can sell at higher premiums to China." Spot copper in Shanghai commanded a premium of up to $150 a tonne above the cash price on the London Metal Exchange, traders said. Industry experts have said a slide in global copper prices would cause China to build its copper inventories again after a heavy offload last year.
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