Inventory destocking combined with widening backwardation pushes Shanghai spot copper premiums to a new high for the year [SMM Shanghai Spot Copper Weekly Review]

This week, Shanghai spot copper premiums climbed continuously, hitting a new high for the year. Early this week, social inventory destocking accelerated, the inter-month backwardation spread widened significantly, suppliers’ willingness to hold prices firm was strong, and spot premiums climbed to a premium of 160-270 yuan/mt, marking a new year-to-date high. Mid-week, as delivery approached, some suppliers’ selling behavior temporarily depressed premiums, but with support from the backwardation structure, the pullback in premiums was limited. After the contract rollover, available spot cargoes remained tight, suppliers continuously raised their quotes, and the center of premiums further shifted upward. By Friday, SMM #1 copper cathode spot premiums were reported at a premium of 350-450 yuan/mt, with an average premium of 400 yuan/mt, hitting another new high for the year. According to SMM data, social inventory in Shanghai recorded 76,500 mt, down 9,100 mt WoW from last Thursday; social inventory in Jiangsu recorded 19,500 mt, down 6,900 mt from last Thursday, with both inventories at year-to-date lows.
Looking ahead to next week, Shanghai spot copper premiums are expected to maintain a strong pattern. Supply side, current social inventories are at year-to-date lows, available spot cargoes remain tight, arrivals of domestic and imported supplies are low, and the short-term tight supply situation is unlikely to reverse quickly. The LME ratio of cancelled warrants has continued to rise, with some warrants cancelled and shipped to the Chinese market, expected to arrive at the end of this month or early next month, when the tight supply may ease. Spread structure side, the high inter-month backwardation spread persists, suppliers’ willingness to hold prices firm is strong, providing robust support for spot premiums. Demand side, downstream acceptance of high premiums is limited, purchases are mainly for essential needs, willingness to chase prices is insufficient, and further upside room for premiums may be constrained by high prices. Overall, under the interplay of low inventory, backwardation support, and high-price demand suppression, spot prices against the SHFE copper 2608 contract are expected to maintain premiums next week, with the overall strong trend persisting.