Widening Backwardation Supports Quotes, Spot Premiums Hit a New High for the Year [SMM Shanghai Spot Copper]

SMM August 31:

Today, SMM #1 copper cathode spot prices against the SHFE copper 2609 contract were quoted at premiums of 550-670 yuan/mt, with an average premium of 610 yuan/mt, up 75 yuan/mt from the previous trading day. In early trading, the SHFE copper 2609 contract initially weakened and then strengthened. After the open, prices fell quickly, touching a low of around 108,550 yuan/mt; they then consolidated at lows, stabilized and gradually rebounded. Near midday, gains accelerated noticeably, with prices rising to around 109,270 yuan/mt before pulling back slightly to settle at 109,150 yuan/mt. The backwardation spread between the current-month and next-month contracts was between 500 yuan/mt and 600 yuan/mt, and LME copper was closed today.

During the day, sales sentiment for Shanghai copper cathode was 3.23, up 0.13 day on day, and purchasing sentiment was 3.50, up 0.16 day on day; historical data can be found in the database. At the start of morning trading, supplier quotes diverged significantly. Some suppliers offered Lufang cargoes with invoices dated this month at a premium of 600 yuan/mt, some offered Tiefeng and Yuguang cargoes with invoices dated next month at a premium of 600 yuan/mt, and Guixi cargoes with invoices dated this month were offered at a premium of 720 yuan/mt. Subsequently, market quotations converged: Tiefeng, Yuguang and other brands were quoted at a premium of 550 yuan/mt for cargoes with invoices dated next month; Lufang, JCC and others were quoted at premiums of 580-590 yuan/mt; Jintun large plates were quoted at 700 yuan/mt for cargoes with invoices dated this month; non-registered copper brands such as TCC and HMC were quoted at premiums of 330-350 yuan/mt for cargoes with invoices dated next month; Somediz was quoted at a premium of 400 yuan/mt for cargoes with invoices dated this month; and Mabende and others were quoted at a premium of 400 yuan/mt for cargoes with invoices dated next month. Entering the second trading session, available supply remained tight and prices did not change significantly.

Looking ahead to tomorrow, the intraday SHFE copper backwardation spread between the current-month and next-month contracts remained at a relatively high 570-600 yuan/mt. Combined with persistently tight available supply in the Shanghai market, this provided strong support for spot premiums. According to SMM's market communication, current mainstream quotations for standard-quality copper with invoices dated next month are basically maintained at premiums of 550 yuan/mt or above, suppliers have limited willingness to sell at low prices, and sentiment to hold prices firm remains strong. However, as spot premiums climbed to high levels, downstream enterprises' acceptance of current quotes declined noticeably. Some enterprises chose to postpone purchases, waiting for premiums to pull back before restocking, and actual transactions during the day remained mainly based on rigid demand. Meanwhile, after the market enters September, a new procurement cycle is about to start, and some downstream enterprises and traders have restocking demand, which may provide some support at the lower end of premiums. Overall, supported by high backwardation spreads and tight available supply, Shanghai spot copper prices against the SHFE copper 2609 contract are expected to remain at high premiums tomorrow. However, high premiums are increasingly restraining downstream purchases, and room for further rapid gains in premiums may be somewhat limited; premiums are likely to consolidate at highs.