London 14/10/2016 - By Perrine Faye and Mark Burton
Aurubis has cut its contractual premium for copper cathode for 2017 to $86 per tonne from $92 this year, marking the lowest offer available to European customers since the Hamburg-based producer started setting annual premiums in 2013.
The figure also matches semi-annual premiums of $86 per tonne that were available to Aurubis customers in the second half of 2012.
The company announced the 2017 premium in a memo to European customers on Friday, October 14 ahead of contractual negotiations that will take place during LME Week from the end of the month.
The 7% cut is broadly in line with customer expectations although many market participants had forecast a figure in the low $80s. The cut comes after sustained weakness in spot premiums in the European market throughout 2016.
Due to the gap between spot and contractual premiums - the Metal Bulletin Rotterdam spot premium has averaged around $52 in the year to date - consumers are likely to try to capitalise on the difference by asking for additional optionality on contractual volumes, as they did last year.
This will allow them to source from the spot market if it remains weak but mitigates the risks of falling short of supply.
In China, where consumers are generally more comfortable with running large spot exposure, contractual premiums set by Codelco are expected to fall into the $70s, physical sources told Metal Bulletin earlier this month.
(Editing by Mark Shaw)