By Chris Kelly
NEW YORK, June 3 (Reuters) - U.S. copper premiums crepthigher this week, buoyed by rising shipping costs and a lack ofavailable scrap metal, an issue that could keep primary cathodepremiums on the rise in the months ahead.
"Premiums are moving slightly up because the freight ratesare killing us," one Midwest dealer said.
"If you're going to any distance from the docks, you'reprobably anywhere from 5.5 to 7 cents per lb."
Premiums paid over the COMEX spot market price HGc1 nowstand about 25 percent higher from the beginning of the year,when they stood in a 4.5 to 5.5 cent range.
Looking ahead, premiums should find further support fromcompanies looking to secure metal ahead of planned maintenanceshut-downs and employee vacation schedules that typicallyaccompany the seasonally slower summer months.
"It's really going to depend on how much it is going tocost to get it out of the warehouses and get it to where youneed it to go," the Midwest dealer said.
For a graphic on COMEX warehouse stocks, click: link.reuters.com/hen89r
Supply tightness in the secondary scrap market, as seen bythe further contraction in price discounts to the COMEX spotprice, was another factor likely to keep primary premiumsbuoyant this summer.
"If the scrap market continues to tighten, they will haveto go to cathode. When there is demand like that, anything isliable to happen," the Midwest dealer said.
Spreads for Bare Bright copper, often regarded as thehighest grade of copper scrap, narrowed to a 5- to 12-centdiscount to the COMEX price, from 5 to 15 cents under at theend of the first quarter.
No. 2 copper scrap, which typically consists of a mixtureof wire and tubing with a 96 percent copper content, was quotedat 42 to 48 cents under, in from 55 to 68 cents in March.
"If one is running a melting operation and you needhigh-grade copper units, be it bare bright wire or cathodes ...when one becomes hard to find, you're forced into buying theother," one East Coast scrap dealer said.
"If copper scrap continues to be tight, then they're goingto start buying cathodes, which could squeeze premiums evenhigher." (Reporting by Chris Kelly;editing by Sofina Mirza-Reid)