HIGH JAPANESE COPPER PRICES HAVE CHINESE BUYING IN CHILE

HIGH JAPANESE COPPER PRICES HAVE CHINESE BUYING IN CHILE

China has been buying its copper directly from Chilean producers or via Western traders because Japanese trade-house offers are too high, say sources here and in Hong Kong.

''There is one vessel on the way from Chile now to main Chinese ports carrying 20,000 metric tons," said Dick Li, of the Hong Kong branch of Nonfemet, the metals trading company for China's Shenzen Special Economic Zone.He said premiums for January shipment were around US$65 a metric ton over the average London Metal Exchange cash price for the loading month.

Premiums offered by Japanese trade houses are over $100 for grade-A copper, he said. "Sumitomo said they can't offer physical help because of the needs of their domestic market."

A source at Sumitomo Corp. here said that the company has sold "2,000 to 3,000 metric tons" of Russian off-grade metal to Chinese buyers, but was not able to meet Chinese demands for lower premiums on grade-A brands.

"Freight costs from Japan to main Chinese ports are $30 to $35," he said. "Also, costs like insurance and buying premiums must be added."

Japanese trade-houses store a certain amount of copper in order to meet Just-in-Time delivery needs for customers, said sources here.

They are able to offer competitive premiums for long-term sales by purchasing from producers at prices based on the month after shipment, while selling the material at prices based on the month of shipment, said one Japanese trader.

"This is only workable when the market is in backwardation (spot prices higher than forward prices)," he noted. "It is very difficult to establish a fresh position now that the market is in contango (forward prices higher than spot)."