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Andy Home on copper’s mating season

As is so often the case, required reading from Andy Home on metals this week. Above is the chart, here’s the link to the whole note, here’s how it starts:

LONDON, Sept 10 (Reuters) – The copper “mating season”, when terms are negotiated for next year’s shipments of both raw materials and refined metal, has just been declared officially open by Japan’s Pan Pacific Copper.
Senior company executives laid out their starting positions at a press conference on Monday.
Pan Pacific Copper’s views count.
Not just because with 710,000 tonnes of refined copper capacity it is one of the world’s largest producers.
But also because its views are implicitly those of the rest of the Japanese copper smelter pool, still a powerful enough entity to determine “benchmark” prices.
And Pan Pacific’s views are that both raw material conversion terms and refined metal premiums should rise next year. And substantially so.
To some extent this is no more than a smelter wish-list, the opening shots in what, based on previous years’ experience, are likely to be protracted and fiercely-contested talks.
And to some extent the company’s stance reflects no more than the current reality in the spot market for both copper concentrates and refined metal. Treatment charges for the former and physical premiums for the latter have soared in the last couple of months.
But there is an inherent contradiction between implied surplus in the raw materials market and tightness in the refined metal market, or at least sufficient tightness to justify Pan Pacific’s call for a 50-percent hike in premiums.
Can the two apparently contradictory trends be reconciled? Yes, but continues here

Read it all and be smarter than the pack about copper.

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