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Copper Premiums May Bottom Out at $100 as Yuan Two-way Trading Curbs Financing Demand
Mar 10,2014 11:42CST
smm insightfeature
Source:SMM
Spot premiums for imported copper may bottom out at $100 per tonne in China as importing losses enlarged further and a more two-way trading policy for Chinese yuan curbed financing demand.

SHANGHAI, Mar. 10 (SMM) – Spot premiums for imported copper may bottom out at $100 per tonne in China as importing losses enlarged further and a more two-way trading policy for Chinese yuan curbed financing demand.

Yangshan copper premiums, published by Shanghai Metals Market daily, slipped to $125-140 per tonne as of Friday, Mar. 7, from an average of $170 per tonne in mid February when they started sliding.

London-Shanghai price arbitrage continued to weaken, to the weakest since May 2012, despite sharp falls in London Metal Exchange’s copper prices last week.

``It is indeed rare to see the LME price, the arb ratio and import premiums fall simultaneously,’’ a trader at a Chinese leading trade house said, ``No doubt about the extreme weakness in the domestic copper market!’’

Loss of importing each tonne of copper nearly doubled to between 3,000-3,5000 yuan ($490-571) per tonne at present, from a loss of around 1,800 yuan at the year’s start, according to SMM data.

The yuan's dramatic fall in late February added to financing-deal makers nervousness about China's slowing economy and an increasingly risky shadow banking system.

Demand for copper financing deals subsided after China’s State Administration of Foreign Exchange (SAFE) announced an investigation into currency speculation disguised as trade finance in early December, SMM reported then.

Should Yangshan copper premiums reach around $100 per tonne, room for further drop would be limited, according to SMM’s research team, as the cost of delivery from LME warehouses in Johor, Malaysia to Shanghai is around $140 per tonne.


 

China copper premiums
Yangshan copper premium wrap
China copper financing deals

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