Copper cathode premia are diverging by destination, not by grade

The spread between Rotterdam and Shanghai delivered premia has widened past what quality differences explain. It is a logistics and financing story.

Observation

Grade A cathode is grade A cathode. The delivered premium is not behaving that way. Destination spreads have widened well past anything the quality spec justifies, and the residual is financing cost plus lane risk.

Reading

Two components explain most of the divergence.

Financing. Working capital cost on metal in transit differs materially by destination because the credit terms available differ. Where letters of credit are cheap and fast, the premium compresses.

Lane risk. Insurance and demurrage exposure on some routings has repriced. That cost lands in the premium rather than in the freight line, which makes it easy to misattribute.

Implication for sourcing agents

If you are optimising purely on the metal price you are solving the wrong problem this cycle. Model the delivered cost including the financing leg, or you will systematically over-buy into the expensive destinations.

We are quoting delivered rather than free-on-board for exactly this reason.