SHANGHAI, Dec. 28 (SMM) - Spot discounts on copper expanded recently due to light trading at the year-end. Spot discounts were 280-160 yuan per tonne December 27, with the average hitting the lowest from February 18, 2016, SMM data show.
The following reasons are behind expanding copper spot discounts, SMM said.
Traders mostly suspended trading for year-end settlement, muting overall trading. Spot supply is still sufficient. Only a few small traders sold at spot discounts, and some downstream buyers purchased as needed. Transactions were dampened, despite active inquiries, SMM said.
Large smelters and traders have completed delivery for this year’s term contracts during December 25-26. Small traders that hurried to generate cash could only sell at larger discounts.
Besides, downstream producers suffered from cash tightness due to payment to banks at the year’s end, SMM added. Most downstream producers work through inventories at present. Noticeable declines in copper prices also left them unwilling to build stocks, despite nearing of the 2017 New Year holiday.
Moreover, downstream consumption softened during the low-demand season.
Spot discounts may expand further before the New Year holiday with weak supply and demand, but any further expansion will be limited, SMM predicts. Whether spot discounts will improve will depend on trading after the New Year holiday.
