London 13/07/2016 - A growing number of smelters, trading houses and metal hedge funds have been involved in the latest wave of deliveries of copper to LME-listed warehouses while the market is depressed, sources said.
A net 45,275 tonnes were delivered into LME sheds in South Korea, Singapore, Malaysia and Taiwan over July 4-12, accounting for 81 percent of total deliveries during this period, according to LME data.
At least three major Chinese smelters, two of which are members of China Smelters Purchasing Team (CSPT), were involved, taking advantage of incentives to cash out while physical premiums have been depressed in China, sources claimed.
Although warehouse incentives have been falling since the end of June - they are now around $40-45 per tonne in Singapore for new enquiries - some big smelters are securing rates at least $10 higher after signing long-term contracts with warehousers earlier.
"Big players [on fixed terms] just don't care about the drop in spot incentives - why should they?" a warrant trader in Asia said, adding that the smelters' shipping costs have been newly negotiated to as low as $0-5 to Singapore and Malaysia.
"I don't see any reason for smelters to stop the delivery - there seems no better option to deal with the metal for the time being," a second trader in China said.
Chinese smelters are widely seen continuing their shipments while market conditions remain downbeat - Shanghai copper premiums are stable for the fourth straight week at a low $45-55 per tonne CIF and in-bonded warehouse over LME cash prices.
Several trading houses also delivered metal in substantial volume to the LME network earlier this month. This was in contrast to June, when a massive delivery was led by one entity, market participants said.
"We delivered some booked cargos to LME that were supposed to arrive at China's ports in June," a trading source familiar with the issue said.
Another trading house also delivered several thousand tonnes onto the LME system early in July, sources directly involved confirmed.
But opinions were divided on whether the trading house responsible for the massive June delivery - and which is believed to hold large positions still - was involved this month. The large trading house in question declined to comment.
"[It] bought huge tonnages from Chinese smelters, signed fixed incentives with warehouses and wants a wider contango for sure - if they didn't deliver massively this time, then they may do soon," the warrant trader suggested.
A large metal hedge fund - renowned for betting on copper prices and playing the arbitrage - was also involved both directly and indirectly in the recent deliveries, some trading sources claimed.
(Additional reporting by Vicky Chen and Ian Walker, editing by Mark Shaw)