Sharp Decline in Copper Prices Prompted Some Downstream Enterprises to Operate at Full Capacity, and Spot Copper Turned to Premiums Across the Board [SMM South China Copper Cathode Spot Weekly Review]

SMM, March 19:

Guangdong: Spot premiums in the region bottomed out and then rebounded this week. After delivery, spot premiums once fell sharply, but as copper prices declined rapidly and downstream consumption increased, premiums climbed accordingly. As of Thursday, both high-quality copper and standard-quality copper returned to premiums: high-quality copper was quoted at 140 yuan/mt, down 20 yuan/mt WoW; standard-quality copper was quoted at a premium of 20 yuan/mt, down 20 yuan/mt WoW; and SX-EW copper was quoted at a discount of 40 yuan/mt, down 20 yuan/mt WoW. On Thursday, the price spread in standard-quality copper premiums between Shanghai and Guangdong stood at Guangdong higher by 90 yuan/mt. As the price spread was relatively small, there was no cross-region cargo transfer. According to SMM statistics, as of Thursday, total inventory in Guangdong warehouses was 81,100 mt, down 9,800 mt WoW, while warrants totaled 43,200 mt, down 6,200 mt WoW. As spot turned to premiums, suppliers actively made shipments to cash in. Specifically, warehouse arrivals this week were 12,900 mt/week, down slightly by 179 mt/week from last week and below the annual average level (14,000 mt/week). Arrivals of both imported copper and domestic copper declined WoW this week. Warehouse withdrawals were 21,700 mt/week, up 1,500 mt/week from last week and far above the annual average level (14,200 mt/week), as downstream manufacturers actively picked up goods amid the sharp decline in copper prices.

Looking ahead to next week, it was learned that a nearby smelter is under maintenance, which will slightly reduce supply. On the demand side, due to the sharp drop in copper prices, orders at many copper processing enterprises surged and they operated at full capacity, yet production still failed to keep pace with the speed of cargo pick-up, with some orders requiring queues for pick-up. Therefore, demand is expected to remain greater than supply next week, inventory will continue to decline, and spot premiums are expected to keep rebounding.

(The above information is based on market collection and the comprehensive assessment of the SMM research team. The information provided herein is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a substitute for their own independent judgment. Any decisions made by clients are unrelated to SMM.)