London Metal Exchange Dynamics: Record Discounts Signal Copper Buying Opportunity for Asian Markets


Oversupply on the London Metal Exchange (LME) has made record discounts against longer-dated agreements, providing an opportunity for Asian buyers to purchase the metal (copper) cheaply, traders said.

The discount, or contango, for the cash copper over the benchmark three-month agreement on the London Metal Exchange hit a record high of $108 a metric tonne on Jan. 8, while the discount over the February contract stands at $58 a tonne.

Asian buyers are using these discounts as leverage to get lower prices from suppliers of the metal utilise to make wire cable for the construction and power sectors.

This trend has not been significantly reversed by the anticipated shortage of supplies brought on by disruptions such as the closure of First Quantum’s Cobre mine in Panama or the reduction of production guidance by Anglo American and Vale.

Copper buyers typically pay the average cash price in the month following the month of arrival. However, a lot of purchasers were able to settle 2024 agreements by utilising the average monthly price at the time the copper is delivered to their facilities.

Supply Disruptions Fail to Reverse Trend: Asian Purchasers Benefit from LME Discounts

A copper trader stated, “We have given Chinese clients more flexibility in the payment period because it is a difficult year for sellers.

The purchasers who have negotiated to use the average monthly shipments will receive more than $50 per tonne less for their copper due to the discounts on the cash agreement against the February contract.

One of the main Asian sources of copper consumers said. “This year we managed to (lock) in more supply priced for the month of arrival.”

According to industry sources, China’s output. Which accounts for over half of the world’s copper production, is expect to reach 26 million tonnes this year. Growing smelting capacity led to an increase in domestic production.

China produced 1.13 million tonnes of refined copper in October, a 13.3% increase over the same month the previous year.