Copper Prices Pull Back, End-Users Increase Procurement Volume, Stimulating Premiums to Rise [SMM Southern China Copper Cathode Spot Weekly Review]

SMM February 5 News:
Guangdong Region: Spot premiums in the region showed a strong upward trend this week. On one hand, the pullback in copper prices stimulated end-users to increase procurement volume; on the other hand, the relatively large price spread between futures contracts created arbitrage opportunities, prompting traders to actively purchase. As of Thursday, high-quality copper was quoted at a premium of 0 yuan/mt, up 120 yuan/mt WoW; standard-quality copper was quoted at a discount of 170 yuan/mt, up 180 yuan/mt WoW; SX-EW copper was quoted at a discount of 230 yuan/mt, up 170 yuan/mt WoW. On Thursday, the price spread for standard-quality copper premiums between Shanghai and Guangdong was 70 yuan/mt lower in Guangdong. The relatively small spread did not lead to cross-regional cargo transfers. According to SMM statistics, as of Thursday, total warehouse inventory in Guangdong reached 45,600 mt, an increase of 1,400 mt WoW, with warrants totaling 23,400 mt, up 1,000 mt WoW. Specifically: warehouse arrivals this week were 18,900 mt/week, up 6,900 mt/week WoW, exceeding the annual average (14,000 mt/week). Arrivals of imported copper were not substantial this week; the increase mainly came from domestic supply, as recent export volumes decreased and shipments were redirected to domestic warehouses. Warehouse withdrawals were 17,500 mt/week, up 2,200 mt/week WoW, also above the annual average (14,200 mt/week). The pullback in copper prices and pre-holiday stockpiling by some enterprises were the main factors driving the increase in withdrawals.

Looking ahead to next week, as more enterprises enter holiday closures, downstream demand will continue to decline, and the market will face an oversupply situation. Therefore, inventory is expected to continue increasing next week. However, spot premiums may not necessarily decline; instead, they could rise. This is because, against the backdrop of a large price spread between futures contracts and the approaching delivery date, suppliers are expected to continue purchasing, thereby stimulating higher premiums.

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