Continuous Inventory Reduction in Domestic and Overseas Markets: Why Did Premiums Remained Flat During the Week? [SMM Analysis]

Last week, in macroeconomics, US non-farm payrolls data was significantly revised down. Since 2023, the US Fed's logic of not cutting interest rates has heavily relied on the performance of non-farm payrolls data, raising market concerns about the reliability of US economic data. The CME Fedwatch tool shows a 73.5% probability of a 25 basis point rate cut in September, and according to the monetary policy meeting minutes released last week, the first rate cut in September is almost certain. Mid-week, the Bank of Japan commented on the future path of rate hikes, stating that it would not rush to raise rates amid frequent financial market fluctuations and unclear domestic inflation prospects. In the domestic market, policies supporting "Large-scale equipment upgrades and consumer goods trade-in" initiatives continued to gain momentum, with new manufacturing equipment in July up 8.5% YoY, a significant acceleration from previous growth rates.

In foreign trade, the price ratio remained flat last week, with market demand focused on cargo arriving in early September. Mid-week, the net outflow of BC copper warrants exceeded 15,000 mt, but there were few spot market offers, and premiums for cargo arriving in late August also remained flat. Mainstream pyro copper under mid-August bills of lading was offered a premium of around $60-70/mt, with actual transaction premiums at $55-65/mt. EQ copper offers increased compared to previous periods, and as we approach September, the imported copper market in the Shanghai bonded zone may be poised for another premium increase.

In the domestic market, the process of reduction in both social inventory and bonded zone inventory continued. With the SHFE copper contango structure narrowing again, the SHFE 2409 contract is likely to shift to a backwardation structure against the 2410 contract. Some holders are closing positions to lock in profits and re-establishing positions, leading to a large number of warrants putting pressure on spot premiums. This situation is similar to early August, and once inventory reduction reaches a new level, spot premiums are expected to rise significantly.

Looking ahead, as August comes to an end, domestic copper cathode consumption is about to enter its traditional peak season. The supply-demand structure has reached a new node, and the expected consumption growth in September may become the main focus of this round. In the short term, the imported copper market in the Shanghai bonded zone is gradually less affected by copper prices, and continued attention is needed on changes in domestic trade premiums.