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Follow Up: Copper Delivery Prices Soar

Fees to get immediate delivery of copper in the U.S. have risen more than 40 percent in the last two months as financing deals lock up supply and much of the metal is being diverted to warehouses

According to reports in the Wall Street Journal and International Business Times, companies like Southwire Co., Encore Wire Corp., and Luvata are paying premiums for immediate delivery despite over-supply because most of the metal is locked up in warehouses reducing available supply to the market.

Inventories at LME warehouses have more than doubled in the past year.  And, two trading firms РGlencore International PLC and Trafigura Beheer BV Рwhich own most of the warehouses in the LME network are at the center of the current inventory controversy.

Trafigura has said that the accumulation of copper in warehouses this year was because of higher mine production and falling demand from China, which is one of the biggest consumers of the metal, according to the Wall Street Journal.

“Everybody is concerned” about the metal’s rising cost, Bill Hyman, president of Burton Wire & Cable Inc., in Manchester, N.H., told the Wall Street Journal.

In response to complaints filed by companies such as Southwire and Encore, the LME introduced new regulation in April to free up metals such as copper that had been stuck behind backlogs of aluminum or zinc.

According to the new regulation, storage sheds must start loading out metals at the rate of 500 tonnes a day. However, the new rule backfired as the wait time to get the copper out of warehouses increased to 23 weeks from 18 weeks.

“I can’t say that [the rule] had any real impact,” David Wilson, a director of metals research with Citigroup Inc. in London, told the Journal.

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