2024 H1 EQ Copper Market Analysis: What Causes Price Fluctuations? [SMM Analysis]

In H1 2024, domestic copper cathode inventories continued to build up. Imports reached 1.5151 million mt by May, up 19.75% YoY. The arrivals of copper cathode from Africa, mainly the Democratic Republic of Congo, increased significantly. What impact does the import of a large amount of non-registered sources have on the domestic and foreign trade markets, and how will it evolve in the future?

First, from the perspective of CIF Shanghai Premium, the bill of lading price for EQ copper is at a significant disadvantage compared to registered pyro copper warrants. Especially with the rise in copper prices in H1, domestic consumption of copper cathode was inhibited, the SHFE/LME copper price ratio window remained closed for a long time, and registered pyro copper, which could be delivered to warehouses, had a price floor. In contrast, the premium for EQ copper during port arrivals declined more significantly, resulting in a notable price spread with mainstream registered pyro copper in H1.

However, the price advantage of EQ copper provides certain benefits in terms of import profitability and exchange rate arbitrage. For example, in early June, during the period when the import window was firmly closed, the Yangshan copper premiums hit a historical low, with mainstream pyro copper bill of lading premiums dropping to around a discount of $15/mt to $20/mt. Previously, EQ copper bill of lading transaction prices fluctuated at a discount of $90/mt to $110/mt. Domestically, the price spread between EQ sources and mainstream standard-quality copper fluctuated only between 150-250 yuan/mt, with relatively lower holding costs. Therefore, the imports of EQ sources continued to increase. In mid-June, the price gap with pyro copper bills of lading narrowed.

From the perspective of import share, EQ copper accounted for about 58% of imports in H1. Due to higher import premiums in Europe, the US, South Korea, and Southeast Asia compared to China in 2024, imports from South America, Japan, and South Korea declined significantly, while the share of arrivals from Africa increased notably. As of May 2024, the imports from major non-registered copper cathode production areas accounted for 58.88%, with a continuous upward trend.

Looking ahead, the increase in the share of EQ copper in domestic and foreign trade circulation has become a certainty. Due to its numerous brands, large price fluctuations, and low capital holding costs, EQ copper trade has relatively higher profit margins. In 2024, with the domestic copper cathode market under pressure, EQ copper transactions in both domestic and foreign trade have increased significantly. In H2, due to domestic policy reasons, the expectation of tight domestic copper cathode supply will increase, and the high copper prices will continue to exert pressure on industry cash flow turnover. The share of EQ copper in trade and processing is expected to continue to rise.