SHFE Base Metals Warrants (2017-10-17)

【SMM Copper Cathode Rod Flash News】Copper prices pulled back sharply and fell below the 96,000 yuan/mt mark, prompting downstream enterprises to engage in concentrated procurement, while new orders received by copper cathode rod enterprises increased significantly starting from the night session. To manage the pace of taking orders, enterprises raised processing fees one after another; meanwhile, due to the surge in order volumes and concerns over downstream cargo pick-up progress, some enterprises have already increased deposits to control risks.

[SMM Shanghai Spot Copper] During the day, the SHFE copper 2604 contract extended its decline, with the trading range falling further to 95,500-96,000 yuan/mt. The center of copper prices kept moving lower, significantly stimulating downstream enterprises' demand to buy the dip and restock, while spot market trading sentiment clearly recovered. Demand side, according to SMM, most downstream enterprises saw a surge in order volumes, with a substantial increase from the previous period, and end-user cargo pick-up enthusiasm also improved in tandem. The pullback in copper prices became more attractive to enterprises, and purchase willingness to buy the dip was strong. Suppliers held prices firm accordingly, driving a notable rebound in spot premiums in early trading. Supply side, social inventory destocked sharply by 24,200 mt from Monday, and the pace of destocking accelerated. The rebound in spot premiums raised suppliers' willingness to sell, leading to more warrants flowing into the market. As premiums reached the psychological expectations of some suppliers, selling of spot warrants began to emerge, easing the previously tight spot supply situation and causing spot premiums to decline later. Overall, current copper prices have become more attractive to downstream enterprises, and faster destocking supports the spot market, but suppliers' selling at high levels combined with changes in the price spread between futures contracts structure put pressure on premiums. Under the tug-of-war between sellers and buyers, Shanghai spot copper is expected to remain in a tug-of-war pattern tomorrow, with premiums likely to stay in the discount range.