[SMM Analysis] Contango structure spread narrowing low inventory Power in Copper City

SMM, 22 November:

This week, the disk structure spread Contango narrowed, from 80 yuan / ton last week to the current 40 yuan / ton. At present, the narrowing of the price spread is more in line with the current market logic. Imported copper has been losing money for some time, and the enthusiasm for foreign trade is not high, resulting in the failure to import a large number of copper into the market for a long time. The trend of accumulating inventory in the fourth quarter of this year is not strong, and the overall inventory situation is low in recent years, so the low inventory state has also caused market traders to pull up the spot water in the market. Last week, the spot rose to a high level of more than 100 yuan, and high spot costs will also promote the market to do lend operations.

In the long run, due to the continued light foreign trade, domestic inventory is difficult to see a significant recovery in the short term, so the low inventory state is expected to remain for some time. At present, due to the impact of a long single delivery period, the domestic spot will maintain a higher water level for the time being, and the market still has the opportunity to continue to do lend. However, due to the gradual weakening of domestic consumption in the fourth quarter, it is expected that the rising pace of the spot market is difficult to continue, waiting for the domestic inventory to reverse, the disk Contango structure spread will expand again.

(SMM Kwong Chi-si)