European copper market weighs impact of Russia export tax, low Asia rates

The Russian government has approved temporary export duties on 340 steel and non-ferrous metals sold outside the Eurasian Economic Union (EAEU), effective from August 1 through December 31.

Companies looking to export copper will have to pay $1,226 per tonne to do so, according to the government decree.

Russian producers export metal to Europe indirectly by sending regular bulk shipments to London Metal Exchange-registered warehouses in Rotterdam and warranting them on the exchange.

“What are they going to do with all of the copper they produce? The Russian domestic market is really not that big,” a trading source said.

While the tax may lessen that trade, there are currently 150,325 tonnes of cathode currently on-warrant in Rotterdam, the vast majority of which is made up of Russian brands, sources who regularly sift copper warrants told Fastmarkets.

The stockpile represents 76% of the LME’s total of warranted copper, meaning it is the most likely to come up if participants purchase physical units through the exchange’s clearing system.

While the units there are a considerable amount of metal, participants questioned whether the export tax might leave the market vulnerable to a cut-off of supply in other ways too.

“150,000 tonnes in Rotterdam can go in two weeks’ time if someone wants it to disappear,” the trading source said.

On the other hand, close to decade-low premiums in China have meant that European producers are not exporting as much as usual, keeping units for the most part inside the EU trading zone.

Fastmarkets assessed the copper grade A cathode ER premium, cif Shanghai at $20-27 per tonne on Tuesday June 29, up from $18-25 per tonne a week ago.

“There’s a greater incentive to sell locally at the same time in places like Italy; I don’t think there are many people actually holding stock,” a second trader said.

Fastmarkets’ copper grade A cathode premium, cif Leghorn moved to $65-75 per tonne on Tuesday, up from $60-75 a fortnight prior and now the biggest premium there since October 2018.

Premiums on a delivered basis in Germany have dropped slightly however, with local buyers able to purchase greater amounts from regional suppliers.

Fastmarkets’ copper grade A cathode premium, delivered Germany is now $80-90 per tonne, down from $85-95 two weeks ago.