Tight Supply Provides Strong Support for Premiums; Imported Copper Premiums Continue to Hit Record Highs [SMM Yangshan Copper Weekly Review]

This week (November 2-November 5), the weekly average warrant transaction price range for Yangshan copper premiums was $189-219/mt, QP November, with an average price of $204/mt; the weekly average B/L transaction price range was $180-208/mt, QP December, with an average price of $194/mt; EQ copper CIF B/L was $91-102/mt, QP December, with an average price of $97/mt. As of November 5, the SHFE/LME copper price ratio for the SHFE copper 2612 contract against LME copper, excluding exchange rates, was 1.1381, with an import loss of around 872.32 yuan/mt, narrowing WoW. As of Thursday, the LME copper nearby showed a backwardation structure, with the LME Cash to 3M contract backwardation narrowing to $105.83/mt, and the carry spread between the November date and December date contracts at $37.99/mt, widening WoW.

During the week, imported copper premiums continued their upward trend, repeatedly hitting record highs. By the end of the week, mainstream transaction prices for registered copper warrant and B/L premiums climbed to $200/mt, while EQ copper premiums also broke through the triple-digit mark. The core driver behind the premium rise remained the tight supply in the Chinese market: on one hand, weaker copper prices during the week boosted consumption, with domestic copper cathode social inventories destocking to historical lows, domestic trade copper cathode spot premiums continuing to set new highs, nearby import price ratios showing profits, and strong demand for cargoes near ports; on the other hand, the persistently high LME backwardation structure raised import costs, and combined with unstable shipping schedules and other factors, recent import port arrivals were limited.

According to SMM, as of Thursday this week (November 5), domestic bonded zone copper inventories decreased by 2,900 mt WoW from the previous period (October 29) to 23,900 mt. Among them, Shanghai bonded inventories decreased by 2,800 mt WoW to 21,400 mt, and Guangdong bonded inventories decreased by 100 mt WoW to 2,500 mt. This week, bonded zone inventories continued to destock, remaining at low levels, mainly due to limited recent port arrivals and warehouse inflows.

Looking ahead, based on shipping schedules, imported copper cargoes are expected to arrive gradually after mid-to-late this month to replenish supply. However, against the current backdrop of low copper cathode inventories, the logic of supply deficit expectations will provide strong support for spot premiums, with cargoes near ports being sought-after and having room for high premiums. Meanwhile, downstream players remain wary of the current high premium levels, so the divergence between upstream and downstream over forward-arrival cargoes may widen further.