Spot Holders Insist on High Premiums amid the Low Copper Inventory

SHANGHAI, Dec 22 (SMM) - On December 22, spot premiums of #1 copper cathode in the Shanghai market moved between 520-620 yuan/mt over the SHFE 2301 copper, and the average premium was 570 yuan/mt, up 40 yuan/mt from December 21. The traded prices of standard-quality copper were 66,680-66,800 yuan/mt, and the high-quality copper was traded at 66,740-66,880 yuan/mt. SHFE 2301 copper rose to 66,300 yuan/mt in the early trading as the shorts cut their positions. Afterwards, the contract trended lower amid the vehement game between the longs and shorts and then bounced back after falling to 66,100 yuan/mt. Finally, the contract closed at 66,130 yuan/mt. The spread between the SHFE 2301 and 2302 contracts fluctuated wildly between 20-70 yuan/mt in the backwardation structure. SMM survey showed that the open interest of SHFE 2303 copper has exceeded that of 2301 and 2302 contracts, and the spread between 2302 and 2303 contracts hovered around 20 yuan/mt in the contango structure.

In the spot market, high copper prices suppressed some downstream companies’ buying interest, but the cargo holders still held high premiums. In the early trading, quotes of mainstream standard-quality copper were around 550 yuan/mt, and those of high-quality copper such as CCC-P were 600 yuan/mt. A small amount of Jinchuan plates were quoted at 580 yuan/mt. Spot quotes offered by Guixi copper holders reached 650 yuan/mt, and prices of hydro-copper such as ESOX were about 500 yuan/mt. At 10 a. m., the trading turned slack, and some holders lowered the prices of the mainstream standard-quality copper to 530-540 yuan/mt. A small number of traders wished to buy goods at a low price, thus they lowered the prices of mainstream standard-quality copper to below 520 yuan/mt, but few traders followed the prices. As of 11 a. m., the mainstream quotations generally stood at above 520 yuan/mt. During the day, some imported copper with low quality such as PASAR, Bulgaria, Kaz Minerals, etc. flowed into the market, which failed to suppress the spot premiums. The cargo holders insisted on high quotes.

SHFE 2301 copper moved rangebound with some upward potential and once soared to more than 66,000 yuan/mt, the spot prices also gained support from the low inventory. The small arrivals of imported copper did not improve the supply tightness. SMM believes that the spot prices will remain firm in the week.