Yangshan Copper Premiums Plunged Amid Weaker SHFE/LME Copper Price Ratio

As of last Friday, Yangshan copper premiums with a quotation period in July stood at $40-56/mt under warrants during June 12-16, with the average flat from a week earlier. Those stood between $48-63/mt under bill of lading with a quotation period in July, with the average down $3/mt. As of June 16, the SHFE/LME copper price ratio stood at 8.03, and import losses stood at 1,110/mt against the SHFE July copper contract.

Last week, market trading was muted as the SHFE/LME copper price ratio continued to weaken. Yangshan copper premiums continued to fall. Sellers of cargoes under warrants had locked in profit previously and completed deliveries of most of the cargoes to the domestic spot markets before the delivery of the June contract. There were few inquiries under warrants amid the sharp declines in the SHFE/LME copper price ratio. Sellers took huge profits from arbitrage operations previously and barely faced any pressure, refraining from lowering quotes noticeably.

In terms of bills of lading, demand was mainly driven by traders rushing to complete their mid-year targets. Meanwhile, arriving shipments have increased recently and the market expects the SHFE/LME copper price ratio to fall further. Quotes thus dropped sharply.

As of last Friday, traded import premiums for high-quality pyro-copper stood at $50-53/mt under warrants, and $46/mt for mainstream pyro-copper. Those for hydro-copper stand at $38/mt. On the B/L front, premiums stand at $55/mt for high-quality copper, $48/mt for mainstream pyro-copper, and $40/mt for hydro-copper.

With the inflows of LME cargoes after delivery, the SHFE/LME copper price ratio is not promising. The gradual opening of the export window is likely to drive exports by domestic smelters, which will help adjust the SHFE/LME copper price ratio.

As of Friday June 16, copper inventories in the domestic bonded zones decreased 8,900 mt from June 9 to 78,900 mt, according to the latest SMM survey. Copper inventories in the Guangdong bonded zone dipped 2,500 mt to 5,500 mt, and inventories in the Shanghai bonded zone fell 6,400 mt to 73,400 mt. There were large volumes of shipments from bonded zone inventories under warrants ahead of the delivery of the SHFE June copper contract. Last week, trades under warrants were quiet as import losses exceeded 1,000 yuan/mt. Arriving shipments in the bonded zones should grow slightly this week amid concentrated shipments arrivals from LME warehouses. Meanwhile, the gradual reopening of the export window will drive some domestic mainstream smelters to export cargoes. Inventories in the domestic bonded zones are expected to accumulate amid the falling SHFE/LME copper price ratio.