Concentrated arrivals of imported copper combined with high backwardation pressure cause spot premiums to pull back rapidly [SMM Shanghai Spot Copper]

SMM, October 12:

Today, SMM #1 copper cathode spot prices against the SHFE copper 2610 contract were quoted at premiums of 80-240 yuan/mt, with an average of 160 yuan/mt, down 380 yuan/mt from the previous trading day. In early trading, the SHFE copper 2610 contract opened higher with a gap, shot up, then retreated, and subsequently consolidated at highs. After the open, prices rallied quickly, touching a high near 111,900 yuan/mt before pulling back to around 111,680 yuan/mt. Copper prices then consolidated around the 111,750 yuan/mt level, briefly dipping to near 111,620 yuan/mt toward midday before rebounding slightly, with the morning session closing at 111,740 yuan/mt. The backwardation spread between the front and next month contracts was between 820 yuan/mt and 890 yuan/mt, and the import profit margin for SHFE copper against the 2610 contract was between a loss of 750 yuan/mt and a loss of 580 yuan/mt.

During the day, the sales sentiment for copper cathode in Shanghai was 3.5, up 0.12 WoW, while procurement sentiment was 2.85, down 0.07 WoW. Historical data can be queried in the database. At the start of early trading, suppliers initially quoted Lufang, Dajiang PC, Zhongjin, and Tiefeng at premiums of 260-400 yuan/mt, then quickly lowered quotes, with Zhongtiaoshan, Tiefeng, and Poland large plates quoted at premiums of 260-300 yuan/mt, JNMC at a premium of 320 yuan/mt, and non-registered copper such as Sicomines, Luanshya, and TFM at premiums of 150-180 yuan/mt. Suppliers then continued to lower quotes. In the second session, Tiefeng and Zhongtiaoshan traded at premiums of 50-80 yuan/mt, Dajiang PC was quoted at a premium of 80 yuan/mt, high-quality JNMC traded at premiums of 120-130 yuan/mt, and non-registered copper traded at discounts of 100 yuan/mt to 50 yuan/mt.

Looking ahead to tomorrow, SMM recorded social inventory in Shanghai at 66,500 mt, up 11,800 mt WoW from last Thursday, mainly due to concentrated arrivals of imported copper. Social inventory in Jiangsu was recorded at 19,800 mt, down 2,600 mt WoW, mainly due to fewer domestic arrivals combined with normal downstream cargo pick-up and warehouse withdrawals. With the significant replenishment of imported supply in Shanghai, the tightness of available supply in the market has further eased. Meanwhile, with delivery approaching, open interest in the SHFE copper 2610 contract stood at about 31,000 lots as of midday, with SHFE warrants at just over 8,000 mt. The backwardation spread between the front and next month contracts remained high during the day, and suppliers showed strong willingness to sell, continuously lowering quotes to facilitate transactions. The spot trading center shifted rapidly from premiums of 300-400 yuan/mt in early trading to around premiums of 50-80 yuan/mt. Demand side, high copper prices combined with the high backwardation continued to suppress downstream procurement enthusiasm, with processing enterprises mainly making just-in-time procurement and limited willingness to chase higher prices. Overall, with increased imported supply, active selling by suppliers, and pressure from the high price spread between futures contracts, spot premiums in Shanghai are expected to remain under pressure tomorrow, likely holding at slight premiums and continuing to pull back slightly.