LME Base Metals Inventories (2017-9-22)

【SMM Copper Cathode Rod Flash News】This week, the operating rate of the copper cathode rod enterprise industry increased by 10.45 percentage points WoW. The pullback in copper prices drove a surge in orders, enterprises accelerated their production pace, and operating rates at downstream wire and cable and enamelled wire producers rebounded steadily. Enterprises were expected to continue raising output and restocking next week, while downstream orders were expected to remain stable. SMM expected the operating rate to increase by 6.27 percentage points WoW to 79.19%.

[SMM Shanghai Spot Copper] Looking ahead to next week, next Monday will be the last trading day of the SHFE copper 2603 contract. According to the SMM #1 copper cathode price assessment methodology, SMM always quotes against the front-month contract. The contango price spread between futures contracts narrowed slightly, and suppliers’ willingness to ship to delivery warehouses weakened somewhat, marginally loosening support for spot premiums. Meanwhile, import losses have narrowed substantially, and there are signs that the import window is about to open. If the window opens, it will bring in cargo from outside China, increasing pressure on spot supply in China and creating potential downward pressure on premiums. On the demand side, downstream enterprises maintained just-in-time procurement, providing some support for prices, but intraday, some downstream enterprises were seen to have limited acceptance of spot cargo with high premiums, with procurement turning more cautious. On the supply side, domestic copper and previously price-locked imported cargo continued to arrive, while social inventory remained high. As SMM always quotes against the front-month contract, the shift in the price spread between futures contracts is expected to result in high premiums against the front-month contract, though this is expected to be corrected on the second trading day. Overall, under the dominance of delivery logic, Shanghai spot copper premiums are expected to remain at elevated levels next Monday.