Spot Premiums Of Copper In Shanghai To Rise Amid Lower Inventory

SMM reported that #1 copper cathode in Shanghai traded with premiums of 260-400 yuan/mt (current-month invoice) against SHFE 2306 copper contract on May 19, and with premiums of 180-250 yuan/mt (next-month invoice) over the contract as of Friday May 26.

Copper prices fell in the first half of the week and the price spread between the SHFE 2306 copper contract and SHFE 2307 copper contract widened. The backwardation between the two contracts rose above 300 yuan/mt. As SHFE copper prices stopped falling at the end of the month, the backwardation narrowed to around 200 yuan/mt. Spot premiums fell and then rose during the week. Both the social inventory in China and the bonded area inventory declined.

The lower inventory may prompt sellers to raise prices this week.  There will be still inflows of imported copper this week, but domestic spot supply will not be ample. It is expected that the spot premiums will rise.

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