Backwardation Spread Widened Sharply, Shanghai Spot Copper Shifted from Premium to Discount [SMM Shanghai Spot Copper Weekly Review]

Shanghai spot copper quotes shifted rapidly from a premium to a discount this week. At the start of the week, typhoon weather disrupted cargo pick-up and transportation at some warehouses in east China, reducing cargo movement efficiency and offering brief support to spot premiums; however, as delivery approached, the backwardation between adjacent contract months widened sharply, suppliers’ contract rollover costs rose significantly, and their willingness to sell increased accordingly. Standard-quality copper quotes slid quickly from a premium at the start of the week to around a discount of 300 yuan/mt. Meanwhile, SHFE copper prices stayed high, end-use demand remained weak, and trading in lower-priced non-registered copper was relatively active, but this failed to drive a marked improvement in overall buying. On the inventory side, Shanghai social inventory came in at 79,300 mt, up 1,000 mt from this Monday; Jiangsu social inventory came in at 18,100 mt, unchanged from this Monday, and spot supply has not yet tightened notably.

Looking ahead to next week, delivery and contract rollover will continue to dominate spot quotes. If the market continues to quote against the SHFE copper 2608 contract, the wide backwardation between adjacent contract months and suppliers’ selling pressure may keep spot quotes at a deep discount. As the pricing basis gradually shifts to the SHFE copper 2609 contract, spot quotes will show a marked recovery; however, this apparent rise in premiums mainly stems from the switch in contract price spreads and does not signal a genuine strengthening in spot supply and demand. From the demand side, high copper prices will continue to limit downstream purchasing volumes, and the market is expected to see persistent need-based buying; low-priced cargoes and cargoes from brands with higher recognition may be relatively favoured. Overall, Shanghai spot copper quotes are expected to shift to a premium against the SHFE copper 2609 contract next week, but the actual transaction price center will remain under pressure from weak end-use consumption, and price spreads between brands and divergence in transaction activity may continue to widen.