High Copper Prices Suppress Consumption, Shanghai Spot Copper Premiums Pull Back Quickly [SMM Shanghai Spot Copper Weekly Review]

This week, SHFE copper spot premiums showed an overall rapid pullback. At the start of the week, the monthly procurement cycle began, restocking demand from some downstream players and traders was released, and spot premiums rebounded slightly. However, as SHFE copper prices continued to rise, copper prices significantly suppressed end-user procurement, and market transactions gradually weakened. After mid-week, suppliers continuously lowered their quotes to boost transactions, and the premium center for standard-quality copper moved down rapidly. Meanwhile, low-priced non-registered copper entered the market, exerting some pressure on quotes for registered standard-quality copper. Toward the weekend, although some downstream players made just-in-time procurement, leading to improved transactions, overall demand release was limited. On the inventory front, SMM data showed that on August 7, social inventory in Shanghai stood at 76,100 mt, edging down from the start of the week; inventory in Jiangsu stood at 20,500 mt, with limited overall inventory changes.

Looking ahead to next week, SHFE copper spot premiums are likely to gradually shift to discounts. Supply side: Although currently available cargoes are not significantly loose and supply for some brands remains tight, as delivery approaches, some suppliers need to shift positions, and the circulation of low-priced cargoes in the market may increase. Meanwhile, the inter-month backwardation spread may widen further, which could also boost suppliers’ willingness to sell. Demand side: With copper prices remaining high, downstream purchases are still mainly based on just-in-time needs, acceptance of high premiums is limited, and there is little room for procurement volumes to expand. Overall, under the combined effect of high copper prices suppressing consumption, increased cargo circulation as delivery nears, and a widening backwardation spread, spot prices for SHFE copper against the SHFE copper 2608 contract are expected to gradually shift to discounts next week. The extent of the discount will need to monitor changes in the inter-month spread and the flow of cargoes in the market.