Copper Cathode Premium/Discount Spread between North China and Shanghai Narrowed; Copper Prices Remain the Dominant Factor [SMM Analysis]

According to SMM data, the average spot discount for SMM #1 copper cathode in North China was 68 yuan/mt in November 2024, an increase of 74 yuan/mt MoM from 142 yuan/mt in the previous month. In November, the average spot premium for SMM #1 standard-quality copper was 26 yuan/mt, with a spread of 94 yuan/mt compared to North China. As of Dec 6, 2024, the average spot discount for SMM #1 copper cathode in North China was 184 yuan/mt, and the average spot discount for SMM #1 standard-quality copper was 45 yuan/mt, with a spread of 139 yuan/mt.

From the trend of copper cathode premium/discount spread between North China and Shanghai, the spread between the two regions has significantly narrowed in H2 this year. On one hand, for the North China market, copper prices often play a dominant role. With the rapid decline in copper prices in H2, local demand has been significantly boosted. On the other hand, in Q3, major smelters in North China underwent maintenance, reducing production and tightening supply, which led to an increase in spot premiums/discounts.

In November, as copper prices fell below the 75,000 yuan/mt threshold, downstream consumption demand was reignited. Although copper prices subsequently entered a consolidation phase, the overall center was significantly lower than in H1. Therefore, at the year-end period, processing enterprises are "running at full capacity" to catch up with annual production plans, and stable market demand has given suppliers the motivation to stand firm on quotes.

In December, the key factor affecting spot premiums/discounts in the North China market remains copper prices. With US employment and inflation data, the US Fed's December meeting and the domestic Politburo meeting, various macro factors will guide copper prices. If copper prices remain stable or weaken, demand will provide sufficient support for spot premiums/discounts. However, if copper prices rise, downstream consumption is expected to struggle to maintain current demand momentum. Coupled with year-end inventory clearing by upstream smelters, there will be some resistance to spot premiums/discounts.