At a time when copper stockpiles are rising to the highest levels in a decade, manufacturers are paying the biggest premiums for the metal in as much as seven years.
Two reports, one from the Wall Street Journal and the other from Bloomberg, show financing deals are locking up supply and extending lines at warehouses.
The reports say that while inventories tracked by the London Metal Exchange more than doubled in the past year and supplies exceed demand for the first time since 2009, getting copper is becoming more expensive and taking longer. Buyers in Shanghai pay $135 a metric ton more than LME futures, up from $55 last year, Metal Bulletin data show. Luvata Malaysia Bhd., a circuit-board parts maker, stopped buying from local LME stockpiles after waiting times rose to three months from three days at the start of 2012.
That means manufacturers may not be reaping all the benefits of the 28 percent slump in prices since they reached a record two years ago. A big reason is because financing accords are curbing access to metal. As much as 30 percent of LME-tracked reserves are tied up in the agreements, Societe Generale SA estimates. About 84 percent of stockpiles are now concentrated in three locations, lengthening lines just as supply from mines is constrained by disruptions including a port strike in Chile and landslides in Utah and Indonesia.
“Premiums are up, and they’re up substantially,” said Rodney Kent, chief executive officer of Camden, New York-based International Wire Group Holdings, Inc., which had sales of $734 million last year. “You used to be able to clear an order and get an off-take in a matter of days, and now it can be a matter of months.”
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Source: tED Magazine