Large price spread between futures contracts, lower contango, and generally moderate trading volume [SMM spot copper in South China]

SMM May 12 News:

Today, spot prices of #1 copper cathode in Guangdong against the front-month contract were reported at a range of 20 yuan/mt to a premium of 150 yuan/mt, with an average premium of 85 yuan/mt, a decrease of 70 yuan/mt from the previous trading day. SX-EW copper was quoted at a discount of 40 yuan/mt to a discount of 20 yuan/mt, with an average premium of 30 yuan/mt, a decrease of 70 yuan/mt from the previous trading day. The average price of #1 copper cathode in Guangdong was 78,340 yuan/mt, an increase of 25 yuan/mt from the previous trading day, while the average price of SX-EW copper was 78,225 yuan/mt, an increase of 25 yuan/mt from the previous trading day.

Spot Market: Guangdong's inventory ended its three-day consecutive decline and started to rise again, mainly due to weakening downstream consumption. Although the price spread between futures contracts has pulled back today compared to last Friday, it remains high at 300 yuan/mt. Affected by this, downstream suppliers are generally reluctant to purchase more and only replenish their stocks on demand. Suppliers have to lower their prices to sell, causing spot premiums to fluctuate and pull back today. As of 11 a.m., high-quality copper against the front-month contract was quoted at 130 yuan/mt, standard-quality copper at parity, and SX-EW copper at a discount of 50 yuan/mt. Attention should be paid to whether the price spread between futures contracts will continue to narrow tomorrow.

Overall, with a still large price spread between futures contracts, downstream purchasing interest remains low, spot premiums have decreased, and overall trading activity is sluggish.

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