[SMM Analysis] the Transformation of Shanghai Copper structure into Contango "Gold, Nine and Silver Ten" may not be beneficial to a good Market

SMM, 15 October:

Last week, the overall Shanghai copper disk structure was basically maintained at a small Back, but after entering this week, the structure began to turn to near-weak and far-strong Contango, and the near-and far-monthly contract price spread widened, from 10 yuan to about 40 yuan, and even a maximum price difference of about 70 yuan.

The change of the disk structure is mainly due to the increase of the overall inventory pressure after the National Day holiday in China. As a result of the domestic National Day holiday, a large number of imported copper clearance into the domestic market, and due to the recent import window opened, imports appear profitable, but also attract traders to do import operations. This week, due to the import operation of imported copper, domestic refineries released warehouse stocks after National Day, and the sharp increase in inventories led to a downward rise in the spot market, significantly easing the sentiment of raising prices last week. Today's spot quotation has been reduced from 70-120 yuan / ton to 100 yuan / ton from 70-120 yuan / ton yesterday. Last week, copper stocks rose 16401 tons to 134509 tons month-on-month, and the increase in inventories after the National Day holiday was also significantly higher than last year.

In addition, from the current copper spot market transaction point of view, the overall trading in last week's National Day holiday replenishment, gradually returned to light this week, the downstream response is positive, "gold nine silver 10" consumption expectations are not as ideal as previously thought, although the ring compared with the previous off-season situation has been repaired, but the overall repair situation is not as expected, it is difficult to support the continued strength of contracts in recent months.

At present has entered the fourth quarter, in the consumption gradually enters the off-season, and the smelter production maintains the normal condition, the fourth quarter inventory pressure is expected to be difficult to digest for a short time. Therefore, SMM believes that according to the current market supply and demand structure, the disk structure of Contango will still have room to expand.

(SMM Kwong Chi-si)