Warrant cargo outflow combined with end-user weak demand, SHFE copper spot premiums retreat from highs [SMM Shanghai spot copper weekly review]

This week, Shanghai spot copper premiums retreated from highs. At the start of the week, the market benchmark switched to the 2609 contract, pushing spot premiums nominally higher, but this did not reflect a significant improvement in supply-demand dynamics. As some warrant cargoes gradually entered the spot market, available spot supply increased, prompting suppliers to continuously lower quotes to facilitate transactions. During this period, the pullback in copper prices triggered downstream dip-buying for restocking and trading firms' purchase demand; however, incremental end-use demand remained limited, with low acceptance of high-premium cargoes. Meanwhile, high-quality copper and registered SX-EW copper were relatively scarce, further widening spreads among brands. SMM recorded social inventory in the Shanghai area at 83,100 mt as of Thursday this week, up 3,800 mt WoW from last Thursday; social inventory in the Jiangsu area stood at 27,500 mt, up 9,400 mt WoW.

Looking ahead to next week, the previously arrived Russian copper has largely been absorbed by the market, and the concentrated impact of earlier import cargoes has eased. However, some non-registered copper delayed by port issues is expected to arrive in batches early next week, potentially adding to spot supply temporarily. On the demand side, downstream players remain focused on dip-buying and essential restocking, with high copper prices and elevated premiums continuing to limit buying amid rising prices. The month-on-month backwardation structure and tight supply of high-quality copper and registered SX-EW copper will continue to support quotes for certain brands. Overall, Shanghai spot copper premiums against the 2609 contract are expected to remain in backwardation next week, but the overall center could weaken further. If copper prices retreat significantly, dip-buying demand may provide some support to the downside of premiums.