Trafigura takes significant copper volumes from LME warehouses

Reuters | April 12, 2023 | 4:06 am

Commodity trader Trafigura has taken delivery of large amounts of copper, much of it produced in Russia, from London Metal Exchange (LME) approved warehouses over recent weeks, two sources with knowledge of the matter said. Falling stocks and expectations of further draws on the LME have helped to limit falls on the copper market triggered by manufacturing data that shows weakening demand in top consumer China and elsewhere.

Copper prices, at around $8,820 a tonne, have dropped nearly 8% since the middle of January to mostly trade between $8,500 and $9,000.

Data from the LME show copper stocks in LME warehouses, at 56,800 tonnes, have fallen by more than 25% since the middle of March, while another 18,250 tonnes is due to leave the system.

One of the sources with knowledge of the matter said Trafigura had been “taking copper from the LME for a few weeks,” adding the amounts included but were not exclusively Russian copper.

Trafigura declined to comment.

Trafigura’s co-head of metals and minerals Kostas Bintas told a conference in Lausanne in March very tight stocks meant the copper price could hit a record high within the next 12 months, even above $12,000 a tonne. The previous record was $10,845 a tonne in March 2022.

Western sanctions on Moscow in response to its invasion of Ukraine have not directly targeted metal produced in Russia, but many copper consumers in Europe are choosing not to use Russian-origin metal.

Industry sources say that explains why so much of it was delivered to LME warehouses, especially in Hamburg, Germany, although the volumes have declined.

In March, Russian copper in the LME system totaled 49%, or 22,275 tonnes, compared with 94% or 51,775 tonnes in February, the LME said on its website.

Copper inventories in LME warehouses in Hamburg have dropped to 23,500 tonnes from more than 37,000 tonnes in February. Another 6,850 has been earmarked for delivery.

Lower copper stocks overall have added to worries about availability on the LME system and created a backwardation or premium for the cash over the three-month contract.