Discounts for Spot Copper in Shanghai Turned into Premiums, Sharp Inventory Decline Confirmed Consumption Recovery

SHANGHAI, Mar 6 (SMM) – Spot discounts in Shanghai narrowed from above 100 yuan/mt to around zero last week. SMM reported that spot discounts of #1 copper cathode expanded from 130-80 yuan/mt against the SHFE 2303 copper contract on Friday February 24 to 10 yuan/mt to premiums of 80 on March 3.

Last week, the SHFE 2303 copper contract price fell before rallying, sinking to a low of 68,500 yuan/mt. Downstream buyers were purchasing actively while spot trades weakened in the  middle of the week due to climbing copper prices. Falling copper prices at the week's end prompted downstream buyers to purchase aggressively. In aggregate, spot trades last week outperformed the week before.

On Friday, according to SMM statistics, the social inventory of copper cathode in Shanghai declined 13,100 mt from Monday, which confirms that consumption has shown signs of improvement.

Notably, the import loss has hovered at around 1,000 yuan/mt recently. The closure of the import window has brought export opportunities to smelters, and the smelters’ shipments to the market have decreased, tightening supply of cargoes in the spot market last week. That also prompted traders to raise their spot quotes.

The contango of SHFE front-month copper contract over the SHFE next-month contract has stabilsied at around 100 yuan/mt in March, strengthening market optimism over demand for the next-month contract. Spot premiums are expected this week as the delivery of the front-month contract nears.