Market activity unexpectedly increased during the week, with post-holiday tightness expectations driving premiums higher [SMM Yangshan Copper Weekly Review]

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This week (April 28-30), the weekly average price range for Yangshan copper premiums B/L transactions was $105 to $125/mt, with QP in May, and the average price was $115/mt, up $10.6/mt WoW. The price range for warrants was $89.33 to $98/mt, with an average price of $93.67/mt, up $5.67/mt WoW, QP in May. The EQ copper CIF B/L price was $65 to $75/mt, with an average price of $70/mt, up $7.8/mt WoW, QP in May. As of April 25, the SHFE/LME copper price ratio for the SHFE copper 2505 contract was 8.269, with an import profit/loss of around -500 yuan/mt. As of Thursday, the LME copper 3M-May was in backwardation of $13.97/mt; the spread between the April date and May date swap fees was in backwardation of $2.8/mt.

Currently, the actual transaction price for high-quality ER copper warrants is $98/mt, mainstream pyrometallurgical copper is $94/mt, and SX-EW copper is $90/mt. The price for high-quality copper B/L is $125/mt, mainstream pyrometallurgical copper is around $115/mt, and SX-EW copper is $105/mt. The CIF B/L price for EQ copper is $65 to $75/mt, with an average price of $70/mt.

This week had only three trading days. Inquiries in the market were unexpectedly strong at the beginning of the week. Although the center of trading volume remained flat, the trading volume increased significantly, and offers showed an upward trend. As the Altonorte smelter in Chile has not yet resumed production, the expected arrivals of electrolytic copper from South America in May-June are expected to decline. At the same time, the departure of electrolytic copper from the DRC has been hindered, and the expected CIF arrivals in May remain tight, prompting large traders in the market to accelerate their purchases, driving up premiums. According to SMM, there were transactions of $280-300 for B/Ls arriving in South America in late May, with QP in June. The LME near-month backwardation structure has widened, and significant destocking in China will attract the continuous cancellation of LME Asian warrants. Looking ahead, domestic trade premiums are expected to have upside room after the Labour Day holiday. The pullback in copper prices and the widening of the near-month backwardation structure provide opportunities for the opening of the import window. The tight supply situation in May is still difficult to alleviate. Attention should be paid to the sudden widening of the near-month backwardation structure for BC copper and the bottoming out of registered warrants in bonded areas. It is expected that Yangshan copper premiums will continue to rise.

According to the SMM survey, as of Thursday (April 30), the copper inventories in China's bonded areas decreased by 3,300 mt from the previous period (April 24) to 81,800 mt. Among them, the bonded copper inventories in Shanghai decreased by 4,500 mt to 71,000 mt, while those in Guangdong increased by 1,200 mt to 81,800 mt. The inventories in bonded areas continued to decline this week, with outflows mainly concentrated in Shanghai bonded warehouses. According to SMM, influenced by the rapid destocking in China, downstream consumers in east China actively purchased this week, attracting some bonded inventories to flow into the domestic market. The increase in bonded inventories in Guangdong was mainly due to the arrival of LME cancelled B/Ls. Looking ahead, the import SHFE/LME price ratio is expected to show a slow recovery trend due to the rise in premiums, but the inventories arriving during the holiday are expected to stay in bonded areas for a short period. It is expected that bonded inventories will increase slightly after the holiday.

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