Post-Holiday Demand Performs Poorly; Spot Premiums/Discounts for Copper Cathode in North China Under Pressure [SMM Analysis]

SMM February 19 News:

    According to SMM prices, the average spot discount for SMM #1 copper cathode in North China after the Chinese New Year (2.5-2.19) was 274 yuan/mt. After the contract rollover, the spot discount once dropped below 400 yuan/mt due to weak demand. The primary reason was the extended Chinese New Year break for downstream enterprises in North China, with most resuming operations around the Lantern Festival, resulting in a sluggish market atmosphere in the first week after the holiday. Following the holiday, as copper prices continued to rise, many downstream players, who had previously held bearish views on post-holiday prices, significantly restrained consumption during the off-season. Downstream enterprises mainly focused on digesting inventory, leading to weak sentiment for copper cathode procurement. Although copper prices pulled back after the contract rollover, downstream players remained cautious, and some suppliers sought to liquidate inventory, further pressuring spot premiums/discounts. However, for the North China market, where demand is highly dependent on copper prices, downstream demand is expected to recover below the 77,000 yuan/mt level. If the price center further declines, downstream buying interest may see additional improvement.

     Additionally, most long-term contracts for copper cathode in North China for 2024 will be executed from March to April, with negotiations for 2025 contracts imminent. Currently, no formal quotes between upstream and downstream parties have been reported. According to SMM prices, the annual average spot discount for SMM #1 copper cathode in North China in 2024 was 180 yuan/mt, a YoY decrease of 118 yuan/mt compared to the 62 yuan/mt discount in 2023. The North China market features relatively concentrated and stable participants. It is understood that this year's long-term contracts will still adopt a fixed premium/discount model. However, given the significant decline in the average spot premium/discount last year, certain disagreements are expected between buyers and sellers.

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