SHFE/LME Price Ratio Continued to Weaken During the Week, Supply-Demand Mismatch Led to Lukewarm Market Transactions [SMM Yangshan Copper Weekly Review]

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This week (January 6-10), the weekly average price range of Yangshan copper premiums B/L transactions was $57-71/mt, QP February, with an average price of $64/mt, down $0.5/mt WoW; warehouse warrants were $64.8-78.8 to $80/mt, with an average price of $71.8/mt, down $3.8/mt WoW, QP January. EQ copper CIF B/L ranged from $7.8/mt to $21.8/mt, with an average price of $14.8/mt, down $5.2/mt WoW, QP February. As of 15:00 on January 10, the SHFE/LME copper price ratio for the SHFE copper 2501 contract was 8.26, with an import profit and loss of approximately -177 yuan/mt. For the SHFE copper 2502 contract, the SHFE/LME copper price ratio was also 8.26, with an import profit and loss of approximately -517 yuan/mt. As of Thursday, the LME 3M-Jan was at C$104.31/mt, and the January date to February date was at C$47/mt.

Currently, the spot price for pyro high-quality copper warehouse warrants is $80/mt, mainstream pyro is $73/mt, and hydrometallurgical is $66/mt; high-quality copper B/L is $72/mt, mainstream pyro is around $65/mt, and hydrometallurgical is $58/mt; CIF B/L EQ copper is $6-20/mt, with an average price of $13/mt.

This week, the import profit window gradually closed, but spot quotations remained high. Due to the financial costs and port congestion costs during the Chinese New Year holiday, there was a significant divergence in supply and demand between buyers and sellers: sellers focused on cargo arriving in mid-to-late January, while buyers mainly demanded cargo arriving after the holiday. This week, the LME Kaohsiung warehouse cancelled warrants of 5,350 mt. Due to the price spread in domestic trade premiums and discounts between Shanghai and Guangdong, some cargoes are expected to be shipped to Guangdong. For EQ, demand for cargo arriving in late January was also weak this week, and premiums fell rapidly due to the SHFE/LME price ratio. SMM noted that the current price spread between the LME 0-3 contract and the COMEX most-traded contract exceeded $450/mt, attracting market attention. If the price spread remains high before the holiday, some South American cargoes are expected to shift to North America. Looking ahead, as copper prices rise, the SHFE/LME price ratio window is expected to deteriorate gradually, and the transaction center for recent arrivals, especially EQ cargoes, is expected to decline. Due to the continued low inventory in bonded zones, registered pyro prices are expected to remain relatively firm.

According to the SMM survey, as of Thursday (January 9), copper inventories in domestic bonded zones increased by 3,500 mt WoW (compared to January 2) to 22,400 mt. Among them, Shanghai bonded inventory increased by 3,500 mt WoW to 18,900 mt, while Guangdong bonded inventory remained flat WoW. This week, bonded inventories stopped declining and rebounded, but the supply mainly came from within the customs territory, with overseas inflows into bonded zones decreasing compared to last week. Looking ahead, although the import profit window has closed, warehouse warrant prices are expected to remain firm. Assuming no change in shipments from domestic smelters, bonded zone inventories are expected to increase slightly next week.

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