Why did spot premiums/discounts for copper cathode in Shandong decline throughout October? [SMM Analysis]

After the National Day holiday in October, copper prices centered around 76,800 yuan/mt, slightly lower than before the holiday but significantly higher than in September. This was mainly due to a series of favorable domestic policies introduced before the National Day. However, after the holiday, spot premiums/discounts for copper cathode in Shandong continued to decline. What is the current supply and demand situation?

According to SMM, only Zhongjin Lingnan and Yanggu Xiangguang Jinda among the four major refineries in Shandong are operating normally, while Shandong Humon Smelting Co., Ltd. and JCC Guoxing are under maintenance. Besides long-term contract outputs, spot order supplies are limited. Additionally, refineries in Shandong are also transporting goods to the south and north. Therefore, from the supply side, the supply of copper cathode in Shandong is not ample compared to normal conditions.

From the consumption side, processing enterprises in the province indicate that current orders are weak. By industry, the copper pipe & tube industry is in a seasonal off-season, with orders showing no significant improvement, only slightly increasing when copper prices pull back. The copper rod industry is also not performing well, with a major copper rod factory in the province recently halting production to digest inventory. According to SMM, processing enterprises state that current copper prices remain high, further pressuring already weak demand.

Overall, post-holiday domestic consumption levels are poor, with social inventory of copper cathode significantly increasing after the holiday and only starting to destock in late October, with the destocking rate weaker than usual. Additionally, a large volume of overseas copper cathode arrivals post-holiday has led to stockpiling in the foreign trade market, causing Yangshan copper premiums to plummet. Many traders are considering directly importing goods into the domestic trade market, significantly impacting spot premiums/discounts. Therefore, weak consumption demand combined with the radiating effect from the Shanghai area has led to a continuous decline in spot premiums/discounts for copper cathode in Shandong.