Inventory Reaches Multi-Year Highs Combined with Significant Outflow of Warehouse Warrants, Spot Premiums Remain at Low Levels [SMM South China Copper Cathode Spot Weekly Review]

SMM, February 20:

Guangdong Region: This week, spot premiums in the region fluctuated at low levels. The persistently high inventory in Guangdong kept spot premiums suppressed, and the large outflow of warehouse warrants after delivery further constrained any upward movement in premiums. As of Thursday, high-quality copper was quoted at a discount of 50 yuan/mt, down by 80 yuan/mt WoW; standard-quality copper was quoted at a discount of 120 yuan/mt, down by 100 yuan/mt WoW; and hydro copper was quoted at a discount of 230 yuan/mt, down by 130 yuan/mt WoW. The increased supply of hydro copper widened its price spread with standard-quality copper. On Thursday, the price spread of standard-quality copper premiums between Shanghai and Guangdong was 10 yuan/mt lower in Guangdong, which was relatively small and left no room for cross-regional transfers. According to SMM statistics, as of Thursday, the total inventory in Guangdong stood at 73,700 mt, up by 6,800 mt WoW, with warehouse warrants totaling 33,400 mt, an increase of 13,200 mt WoW. Specifically, this week’s arrivals were 20,200 mt/week, down by 9,600 mt WoW but significantly higher than the annual average level (14,000 mt/week). The active transfer to delivery warehouses by smelters at the beginning of the week was the main reason for the higher arrivals. Outflows from warehouses were 12,900 mt/week, below the annual average level (14,200 mt/week), as high copper prices constrained downstream enterprises' willingness to place orders, leading to a decline in weekly outflows.

Looking ahead to next week, with no delivery impact, warehouse arrivals are expected to be lower than this week, while consumption is likely to decrease as enterprises reduce demand near month-end. Therefore, we anticipate a weak supply and demand scenario next week. However, arrivals are still expected to exceed consumption, leading to a continued increase in weekly inventory, though the growth rate is expected to slow compared to this week.

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