Tight available supply after contract rollover combined with recovering demand pushed spot premiums higher than yesterday [SMM Shanghai spot copper]

SMM, October 16:

Today, spot premiums for SMM #1 copper cathode against the SHFE copper 2610 contract were quoted at a premium of 730 yuan/mt to 920 yuan/mt, with an average of 825 yuan/mt, up 740 yuan/mt from the previous trading day. In early trading, the SHFE copper 2611 contract rose sharply overall. After the open, prices quickly climbed to around 109,400 yuan/mt, then continued to move higher after a brief consolidation, breaking through 109,500 yuan/mt and 109,700 yuan/mt in succession. The futures market then advanced rapidly again, reaching a high of around 110,200 yuan/mt. After the spike, prices pulled back slightly and consolidated at highs, rebounding somewhat near midday before closing the morning session at 110,170 yuan/mt. The backwardation spread between the front and next month contracts was between 650 yuan/mt and 690 yuan/mt, and the import profit margin for SHFE copper against the 2610 contract for the current month was between a loss of 480 yuan/mt and a loss of 390 yuan/mt.

During the day, the selling sentiment for copper cathode in the Shanghai region was 3.12, up 0.20 MoM, and the purchasing sentiment was 3.01, up 0.21 MoM. Historical data can be queried in the database. Suppliers' initial quotes for Lufang, Zhongtiaoshan, Tiefeng, Jintong Yusheng, and others were at premiums of 700 yuan/mt to 850 yuan/mt, with high-quality JNMC quoted at a premium of 850 yuan/mt. Suppliers then quickly raised quotes to premiums of 800 yuan/mt to 850 yuan/mt, and high-quality Jinchuan plate was raised to a premium of 900 yuan/mt. Non-registered copper from Luanshya, TFM, KFM, and others was quoted at premiums of 550 yuan/mt to 600 yuan/mt. In the second session, suppliers lowered quotes slightly, with Zhongtiaoshan, Jintong Yusheng, Dajiang HS, and others quoted at premiums of 780 yuan/mt to 800 yuan/mt, and Tiefeng quoted at premiums of 700 yuan/mt to 750 yuan/mt. High-quality Jinchuan plate was quoted at a premium of 880 yuan/mt, and non-registered copper was quoted at premiums of 500 yuan/mt to 550 yuan/mt.

Looking ahead to tomorrow, after the SHFE copper contract rollover is completed, the spot market's pricing benchmark will switch to the 2611 contract. During the day, the phased pullback in the futures market helped release some orders and purchasing demand from downstream copper processing enterprises. Combined with the fact that available supply in the market remains relatively tight, suppliers are showing a strong willingness to hold prices firm and hold back from selling, which together pushed spot premiums up rapidly. Supply side, the delivery volume for the SHFE copper 2610 contract was 4,895 lots. After delivery is completed, the pace of warrant cancellations and the re-entry of supply into the spot market will be a key focus. If delivered supply is released in a concentrated manner, the tightness of available supply in the Shanghai market may ease somewhat, and the current high premiums will face some pullback pressure. However, if the outflow of warrants remains slow, the short-term tight supply situation will continue to support premiums. Demand side, attention should be paid to whether downstream new orders can continue to expand in volume against the backdrop of high copper prices. Overall, spot premiums in the Shanghai region are expected to continue to consolidate at highs tomorrow, but the room for further sharp upside may be relatively limited.