SHANGHAI, Apr. 25 (SMM) – Yangshan copper premiums have kept rising since April, and climbed up to USD 130-140/mt as of April 23. SMM expects premiums to continue to rise after the upcoming May Day holiday, and risks will also come along with it.
Most domestic cargo-holders are pessimistic towards premiums. It is rumored that copper inventories in Shanghai bonded areas have dropped to around 600,000 mt. Falling inventories and market optimism will continue to drive up premiums. China’s copper imports will likely also rise in April on a monthly basis.
However, expected increases in imports may not serve as a sign of consumption improvement in China, and the growth, rather, will add to domestic spot supply, and weigh on copper prices.
According to SMM sources, copper inventories in Shanghai bonded areas are now showing a sign of falling.
It should be pointed that the declines in inventories are due largely to the favorable SHFE/LME copper price ratio, instead of cargo-holders’ selling-off activities to pay back bank loans. After obtaining 3 or 6-month loans from banks, most traders choose to hedge risk exposure, just like copper smelters, which hedge risks from copper concentrate price changes by fixing TC/RC.
The SHFE/LME copper price ratio has been moving around 7.3 since the 2013 Chinese New Year holiday. With limited imports and most traders have not active in signing long-term contracts this year, domestic traders choose to purchase in large amounts in spot market when the ratio is favorable, to deliver their contracts.