* Codelco offers European 2015 term premiums at $112/T
* Market expects flat or slight fall in premiums in China
* Negotiations to take place during LME Week next week (Adds Codelco response, reaction, background)
By Harpreet Bhal and Polly Yam
LONDON/HONG KONG, Oct 13 (Reuters) - The world’s top copper producer Codelco will offer its customers in Europe premiums of $112 per tonne in 2015, unchanged from last year, reflecting weak market conditions due to poor demand and rising supply, sources said on Monday.
The flat premium - paid above the London Metal Exchange (LME) cash price to cover physical delivery costs such as transport and insurance - raises expectations that the miner might offer flat, or even slightly lower, term costs for its biggest buyer China in 2015, the sources said.
Chinese customers paid $138 a tonne for 2014 deliveries, the sources with direct knowledge of the matter said.
Chinese and foreign banks have tightened credit conditions in the copper trade in China since June, when an alleged scam came to light at Qingdao port involving metal being used multiple times as collateral for loans.
The restrictions mean small importers in China are reluctant to commit to 2015 term shipments.
As the world’s top copper producer, Codelco carries significant weight on the global metals market and its premiums are seen as an industry benchmark.
A Codelco spokesman said the company had no comment “on commercial issues”.
Term premiums are typically negotiated between suppliers and consumers for long-term contracts, and deals are discussed during LME Week, an annual gathering of the global metals industry which takes place next week in London.
“Codelco have told their customers in Europe that they are offering premiums unchanged from this year,” a Europe-based source said.
Copper premiums in the spot market in Europe are at their lowest levels since June last year at around $60-90 a tonne, as low demand in Europe coincides with a ramp-up in production and a recovery in raw material exports from Indonesia.
Europe’s biggest copper smelter Aurubis last week raised its 2015 copper cathode premium by $5 to $110 a tonne.
Benchmark copper prices on the LME have tumbled almost 9 percent since the beginning of 2014, as the market anticipates a rise in supply over the next year.
A Reuters poll in July showed analysts expect the copper market to be in a 226,000-tonne surplus by the end of 2014, widening to 285,000 tonnes in 2015.
“There isn’t a lot of demand at the moment. The market is slow and I don’t expect to see much of a pickup in activity for the remainder of the year,” a physical copper trader said.
Nic Brown, head of commodities research at Natixis, said copper producers could struggle to keep charging customers in China high premiums for material, given rising refined copper production in the world’s top consumer of the metal.
“I will not be surprised to find premiums in China a little bit lower for the year ahead,” Brown said.
Chinese refined copper production rose 7.4 percent in August from July to 680,128 tonnes, beating the record of 654,803 tonnes in November 2013, data from the National Bureau of Statistics showed in September.
China is the world’s top copper consumer, accounting for roughly 40 percent of global refined demand. (Additional reporting by Fabian Andres Cambero in Santiago; Editing by Susan Thomas and Veronica Brown)