After Consecutive Declines In Copper Prices, Downstream Purchasing Has Increased, Leading To A Rebound In Spot Premiums

Guangdong: Last week, spot premiums in this region showed a bottoming out before rebounding trend. At the beginning of the week, spot premiums experienced a sharp increase due to the delivery. However, the high premiums were not accepted by downstream buyers, forcing sellers to continuously lower the premiums to sell their inventory. By Friday, stimulated by the continuous decline in copper prices and spot premiums, downstream purchasing increased, leading to a rebound in spot premiums.

As of last Friday, the premium for high-quality copper was reported at 90 yuan/mt, a rise of 90 yuan/mt compared to a week earlier. The premium for standard-quality copper was 70 yuan/mt, up by 120 yuan/mt. The premium for hydro-copper was reported at 20 yuan/mt, up by 120 yuan/mt. As of last Friday, quotes for standard-quality copper in Shanghai exceeded those in Guangdong by 10 yuan/mt, indicating a small price difference between the two regions and limited opportunities for interregional stock transfers. According to SMM data, as of Friday, total copper inventories in Guangdong was 25,500 mt, decreasing by 900 mt compared to the previous Friday.

Specifically, last week's shipments arrivals amounted to 13,600 mt/week, a decrease of 1,900 mt/week compared to the previous week. The weekly delivery volume was much lower than the weekly average level of 19,000 mt/week last year. After delivery, the amount of copper shipments from smelters to warehouses decreased while the direct shipments to downstream buyers increased. Additionally, last week's clearance of imported copper decreased, resulting in a decrease in warehouse warrants. The weekly shipments from warehouses were 14,400 mt/week, a slight increase of 71 mt/week compared to the previous week, but significantly lower than the weekly average level of 19,500 mt/week last year. SMM understands that actual consumption showed a significant increase last week due to a large downstream processing enterprise operating at full capacity. This week, the import volume will increase compared to last week, and the domestic copper arrival volume will also be higher. However, consumption is expected to weaken as corporate purchasing enthusiasm declines towards the end of the month.

In conclusion, SMM expects that this week will see an increase in supply and a decrease in demand, which may result in a slight increase in weekly inventory. The premium is likely to decline with some fluctuations. Currently, there are still 21,000 mt of warrants, and it is expected that the shipments of warrants will increase given the high premiums.

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