Available supply continues to tighten, Shanghai spot copper premiums approach the year's high [SMM Shanghai spot copper].

SMM, August 27:

Today, SMM #1 copper cathode spot prices against the SHFE copper 2609 contract were quoted at a premium of 380–520 yuan/mt, with an average premium of 450 yuan/mt, up 140 yuan/mt from the previous trading day. The SHFE copper 2609 contract opened sharply higher and then drifted higher overall. After the open, prices quickly surged from around 108,600 yuan/mt to above 108,800 yuan/mt, and although there were intermittent pullbacks, the trading center continued to rise; during the session, prices repeatedly approached 109,000 yuan/mt. Near midday, SHFE copper consolidated at highs, eventually closing around 108,970 yuan/mt. The backwardation spread between the front-month and next-month contracts stood at 310–350 yuan/mt, and the import profit margin for SHFE copper against the 2609 contract was at a loss of 2,110–2,160 yuan/mt.

In the Shanghai region, selling sentiment for copper cathode was 3.10, up 0.13 MoM, while purchase sentiment was 3.34, down 0.10 MoM; historical data is available for query in the database. Early in the morning session, suppliers quoted cargoes with invoices dated next month at a premium of 400 yuan/mt against the JCC price, and after brisk deals, they raised their quotes to a premium of 450 yuan/mt for such cargoes. Cargoes with invoices dated this month from Zhongtiaoshan and Dajiang HS were quoted at a premium of 400 yuan/mt, and after trades, quotes were largely at premiums of 420–450 yuan/mt for those cargoes. For non-registered copper, quotes for cargoes with invoices dated next month started at a premium of 250 yuan/mt and were subsequently raised to a premium of 300 yuan/mt. In the second time period, available supply tightened further, with some suppliers trying to quote a premium of 500 yuan/mt for standard-quality copper cargoes with invoices dated this month.

Looking ahead to tomorrow, available copper cathode supply in the Shanghai market is tightening further, with market offers quickly dwindling after lower-priced cargoes are traded. Suppliers are holding prices firm and showing a strong inclination to hold back from selling, driving spot premiums rapidly toward their highs for the year. Meanwhile, the spot price spread between Shanghai and Guangdong has widened to about 235 yuan/mt. If this spread can subsequently cover transportation costs, capital occupation, and time costs, some Guangdong cargoes may become viable for shipment to Shanghai, marginally easing expectations of tight Shanghai supply. However, it still takes some time for cross-regional cargoes to be organized, dispatched, and actually delivered into warehouses, so the near-term boost to spot supply will likely remain relatively limited. Demand side, copper prices stayed relatively high, and with spot premiums also rising quickly, downstream acceptance of high-priced cargoes has weakened, with purchase sentiment pulling back slightly today and the willingness to chase higher prices likely to diminish gradually. On balance, supported by tight available supply and firm holding by suppliers, spot premiums for SHFE copper against the 2609 contract are expected to stay elevated tomorrow. However, with the inter-regional arbitrage window between Shanghai and Guangdong nearing open, and with high copper prices and high premiums suppressing demand, the room for premiums to rise further may narrow to some extent.