Tight supplies of primary metal, strong demand and jitters over production and labour issues in Canada propped up US copper premiums near multiyear highs on Tuesday, while aluminium premiums also were firm, traders said.
Copper cathode premiums in the US Midwest were quoted in a range of 7.5 cents to 8.5 cents a lb above copper futures on the New York Mercantile Exchange's COMEX division. East Coast premiums were seen on either side of 9 cents above COMEX. Premiums reflect the cost of freight and insurance paid by the buyer for delivery to the consumer's works.
Quotes last lurked at levels this high in the late 1980s and early 1990s, traders said. Some of the buying was thought to be consumer hedging ahead of the expiration of a labour contract at Noranda Inc's Canadian Copper Refinery, or CCR, in Montreal.
The refinery last year produced 235,000 tonnes of copper cathodes, about 1.5 percent of world supply.
"Premiums are still very strong, hovering on whether or not Noranda will strike, and buoyed a bit by the problems at Falconbridge," one Midwestern dealer said.
A three-year labour contract at the CCR expires May 30, and talks began last quarter. With global demand for copper outstripping supply, metals markets are on edge for any possible strikes.
Separately, Falconbridge Ltd said last week it would not meet near-term customer contracts for about 12,000 to 13,000 tonnes of cathode from its Kidd Creek smelter after mechanical problems unexpectedly shut the facility in Timmins, Ontario.
"The Kidd Creek force majeure has caused some cathode consumers to look at alternatives, such as scrap," said another trader. Secondary copper has become more plentiful compared with earlier this year, as Chinese buying has moderated in the last six weeks.
In addition, premiums for primary copper surged in the Northeast because of high domestic trucking rates, with the bulk of US producers located in the Southwest, and because copper shipments from South America to the area recently have been scarce, keeping supplies tight, traders said.