Greater demand bolsters China copper import premiums

SHANGHAI, May 31 (SMM) – Chinese Yangshan copper import premiums climbed in May as new arbitrage opportunities and a supply gap bolstered demand for seaborne materials.

SMM assessments showed that Yangshan copper premiums for warehouse warrants stood at $51-66/mt as of Thursday May 30, up about $10/mt from $36-60/mt after the May Day holiday.

Import profits recovered to veer between positive and negative territory for much of the past month, and once remained positive for over a week. This reopened the arbitrage window and triggered import flows into the domestic market.

Improved demand recovered confidence among sellers, who became unwilling to lower quotes to offload cargoes, and traded prices came in rapidly higher premiums.

Lowered domestic inventories also grew momentum in Yangshan premiums. With a slew of Chinese smelters conducting maintenance in April-May, fewer supplies extended declines in copper inventories across SHFE-approved warehouses since the middle of April, and grew demand for imports.

The latest SMM survey showed that most of this year’s maintenance works across Chinese copper smelters will occur in the second quarter, with some 150,000 mt of output being affected. Copper cathode production in China shrank 4.2% year on year in April, and is likely to see a 14.6% year-over-year drop in May.

A smaller discount of copper scrap against copper cathode increased the appeal of copper cathode, which also expanded declines in domestic inventories.

The overseas market, meanwhile, is well supplied, with the discount for cash copper over the three-month contract on the London Metal Exchange holding at about $30/mt. Copper stocks across LME-approved warehouses gained close to 100,000 mt from the Chinese New Year holiday to 212,450 mt as of Thursday May 30, data from the bourse showed.

The divergence in supply overseas and domestically drove seaborne cargoes to flow into China.

Copper stocks across Shanghai bonded areas registered its first weekly decline since the CNY break in the week ended May 10, and dropped 12,000 mt last week to 570,000mt as of May 24, suggesting that imported copper is flowing into the domestic market. The small, open arbitrage window has not ushered in large inflows and this kept current import premiums firm.