Widening price spread between futures contracts suppresses contango, with trading sentiment pulling back. [[SMM] Shanghai spot copper]

SMM News on May 7:

       Today, SMM reported that spot #1 copper cathode was quoted at a premium of 240-280 yuan/mt against the front-month 2505 contract, with an average premium of 260 yuan/mt, down 25 yuan/mt from the previous trading day. The SMM #1 copper cathode price ranged from 78,300 to 78,860 yuan/mt. Driven by positive domestic macro sentiment, the SHFE copper 2505 contract surged to 78,800 yuan/mt in the morning session before paring gains, but largely held above the 78,000 yuan/mt level. During the first trading session, the BACK price spread between futures contracts for the next month fluctuated between 260-300 yuan/mt. After entering the second trading session, the futures market pulled back, causing the price spread to widen by nearly 400 yuan/mt.

       Transaction sentiment during the day declined compared to yesterday. According to SMM data, the sentiment index for copper cathode suppliers in Shanghai was 2.93, while the purchasing sentiment was 3.54, down 0.15 and 0.21, respectively, from the previous day. In the early morning session, suppliers quoted mainstream standard-quality copper at a premium of 260-270 yuan/mt, with transactions also concluded at premiums of 260-270 yuan/mt for JCC. Jinchuan (plate) was quoted at a premium of 280 yuan/mt, and Guixi copper at a premium of 300 yuan/mt. Subsequently, transactions were mainly centered around Zhongtiaoshan, Tiefeng, imported Jinguan, and Dajiang PC, with transaction prices ranging from 230-250 yuan/mt. Entering the second trading session, the widening price spread between futures contracts suppressed premiums, prompting suppliers to offer discounts to lock in profits from bull spreads. However, purchasing sentiment weakened in the second trading session, resulting in minimal actual transactions.

       Currently, the open interest of the front-month SHFE copper contract corresponds to a delivery volume nearly 10 times that of the existing futures warrants. The market needs to be vigilant about the risk of further widening price spreads between futures contracts. It is expected that under the influence of the price spread, spot premiums will come under pressure tomorrow.