As of last Friday, Yangshan copper premiums with a quotation period in May stood at $18-33/mt under warrants during April 24-28, with the average up $2.5/mt from a week earlier. Those stood between $36-50/mt under bill of lading with a quotation period in May, with the average up $3/mt. As of April 28, the SHFE/LME copper price ratio stood at 7.85, and import losses stood at 100 yuan/mt.
Yangshan copper premiums rose slightly last week. Despite pre-holiday stockpiling, direct shipments from smelters prevented spot quotes in Shanghai from picking up significantly. In terms of bills of lading, although the overall market quotations have moved up, the actual transaction prices have not risen significantly. Some sellers were not optimistic over the SHFE/LME copper price ratio after Labour Day holidays. This was because at the end of April, South Korean LS-Nikko Copper's Onsan factory completed maintenance, which will bring about an increase of 10,000 mt in supply in May. Meanwhile, disruptions to the seaborne transportation abated, and shipments from Russia to China transit railway increased. The market expects supply to grow in May. However, SMM believes that those shipments of Russian copper may be directly digested by the downstream plants, and the output growth at Onsan smelter will have an insignificant impact on the SHFE/LME copper price ratio.
The current domestic copper social inventory is still relatively low, supporting domestic spot premiums. Available cargoes under small orders in European have increased recently, with a copious copper supply in several European countries. The backwardation structure has turned into contango on LME copper. SMM believes that the SHFE/LME copper price ratio will improve and Yangshan copper premiums should rise further.
Copper inventories in the domestic bonded zone increased 2,900 mt from April 21 as of Friday April 28, and stood at 158,600 mt, according to the latest SMM survey. Inventory in the Guangdong bonded zone added 1,200 mt to 16,300 mt, and inventory in the Shanghai bonded zone advanced 1,700 mt to 142,300 mt.
Cancelled warrants from LME warehouses in Asia arrived in China last week, growing shipment arrivals under bill of lading compared with the previous week. Some cargoes went to Zhejiang due to local import subsidy policy. Arriving shipments of Russian copper by means of railway increased recently, and are expected to directly flow into the domestic trading market. Driven by increasing arriving shipments under bill of lading after Labour Day holidays, copper inventories in China's bonded zones will continue to accumulate.
