Inventory continues to accumulate, but available supply is limited; spot premiums are expected to stay high after the contract rollover [SMM Shanghai Spot Copper]

SMM News, Oct 15:

Today, SMM #1 copper cathode spot prices against the SHFE copper 2610 contract were quoted at a discount of 30 yuan/mt to a premium of 200 yuan/mt, with the average at a premium of 85 yuan/mt, up 135 yuan/mt from the previous trading day. In the morning session, the SHFE copper 2610 contract basically traded between 110,180 yuan/mt and 110,600 yuan/mt, while the SHFE copper 2611 contract basically traded between 109,610 yuan/mt and 110,010 yuan/mt. The backwardation price spread between futures contracts was 520 yuan/mt-620 yuan/mt, and the import profit margin for SHFE copper against the 2610 contract for the current month was a loss of 790 yuan/mt to a loss of 680 yuan/mt.

Intraday, the sales sentiment for copper cathode in Shanghai was 2.91, down 0.16 MoM, while purchasing sentiment was 2.81, up 0.04 MoM; historical data can be queried in the database. In the first round, suppliers quoted premiums of 760 yuan/mt-800 yuan/mt against the 2611 contract for Lufang, Dajiang PC, etc. Subsequently, suppliers continuously lowered their quotes. In Changzhou, some low-priced cargoes were quoted at a premium of 500 yuan/mt; after rapid deals, suppliers slightly raised quotes to a premium of 550 yuan/mt. For high-quality copper, Jinchuan (plate) and Jintun (plate) were lowered from a premium of 800 yuan/mt to a premium of 680 yuan/mt-700 yuan/mt. Non-registered copper and registered SX-EW copper cargoes were relatively scarce. Entering the second time window, market trading was subdued, with some deals for Lufang, Xiangguang, etc. done at premiums of 600 yuan/mt-650 yuan/mt.

Looking ahead to tomorrow, SMM recorded Shanghai social inventory at 70,200 mt, up 3,700 mt MoM; Jiangsu social inventory at 22,000 mt, up 2,200 mt MoM. Meanwhile, with delivery approaching, some suppliers chose to register deliverable cargoes as warrants to participate in delivery; SHFE registered warrants increased by more than 10,000 mt, and attention should be paid after delivery to the outflow of warrants that are not matched. Demand side, after SHFE copper prices pulled back somewhat in the night session, downstream purchasing improved slightly from earlier, but overall volume growth was still not evident, and the market was still dominated by rigid-demand transactions. Intraday, suppliers continuously lowered quotes against the 2611 contract to promote deals, but low-priced cargoes were traded quickly, and the market’s available low-priced cargoes were relatively limited, providing some support to spot premiums. As the 2610 contract completes delivery, the spot quotation benchmark will switch to the 2611 contract starting tomorrow. Spot premiums in Shanghai are expected to remain at a relatively high level, and in the short term may consolidate around the current transaction center against the 2611 contract. Going forward, attention should be paid to the release of deliverable cargoes, arrivals of imported copper, and the actual intensity of downstream restocking after copper prices pull back.