LME Copper Structure Turns Backwardation Again During the Week, SHFE/LME Price Ratio Deteriorates Rapidly, Export Window Opens [SMM Yangshan Copper Weekly Review]

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This week (February 17-20), the weekly average price range of Yangshan copper premiums B/L transactions was $50-66/mt, QP March, with an average price of $57.75/mt, down $3.25/mt WoW. Warehouse warrants were $50-64/mt, with an average price of $56.8/mt, down $7/mt WoW, QP March. EQ copper CIF B/L ranged from $2.5/mt to $13/mt, with an average price of $7.75/mt, down $2.65/mt WoW, QP March. As of 15:00 on February 20, the SHFE/LME copper price ratio for the SHFE copper 2503 contract was 8.15, with an import loss of approximately -1,100 yuan/mt. As of Thursday, the LME 3M-Mar contango was C$6.43/mt, and the February date to March date spread was Backwardation $0.13/mt.

Currently, the spot price for pyro high-quality copper warehouse warrants is $60/mt, mainstream pyro $54/mt, and hydrometallurgical $48/mt. High-quality copper B/L is $62/mt, mainstream pyro around $56/mt, and hydrometallurgical $50/mt. CIF B/L EQ copper is $4/mt to $10/mt, with an average price of $7/mt.

This week, the market fluctuated frequently. After a brief shock in the LME February date to March date spread last Friday night, the LME March date to April date price spread turned back to a backwardation structure mid-week. The significant volatility in the spread has sharply worsened the SHFE/LME price ratio, and by the end of this week, the import loss for the SHFE copper 2503 contract had expanded to 1,200 yuan/mt. It is reported that domestic smelters are planning to increase export volumes. Due to the above reasons, warehouse warrant holders actively sold warehouse warrants, leading to a significant decline in warehouse warrant premiums during the week. However, due to tight supply of forward-month B/L, registered B/L and EQ cargo spot prices remained firm, resulting in an inverted premium between warehouse warrants and B/L, with significant differences between buyers and sellers.

According to the SMM survey, as of Thursday (February 20), copper inventories in domestic bonded zones increased by 3,400 mt WoW to 38,800 mt. Among them, Shanghai bonded inventories rose by 4,700 mt WoW to 33,000 mt, while Guangdong bonded inventories fell by 1,300 mt WoW to 5,800 mt. The increase in bonded zone inventories this week was still due to domestic smelters' export arrivals. Since last Friday, the SHFE/LME price ratio has fluctuated significantly, and the export window has opened. It is expected that domestic smelters will continue to increase export volumes. Bonded zone inventories are expected to continue rising next week.

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