[SMM Analysis] overseas copper spot strength Yangshan copper premium has been falling, but LME spot rising water is difficult to expand.

Published: Sep 24, 2020 13:52

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[SMM analysis] Lun copper inventory is falling non-stop! The cancellation of warehouse receipts accounts for a high proportion of hovering LME back structure can be expanded again?

SMM9 March 24: after entering July, the LME copper 0-3 liter discount basically maintained the back structure and showed a gradual expansion trend, reaching 40.25 US dollars / ton on September 18, and the overseas squeeze pressure appeared again.

Strong spot premium on the foreign trade market sellers form greater pressure, in the case of sluggish demand, the holder repeatedly reduced the price delivery, Yangshan copper premium all the way down. As of September 24, Yangshan Copper premium warehouse sheet quoted 45-58 US dollars / ton, bill of lading quoted 30-46 US dollars / ton.

The logic behind the strength of overseas spot is mainly the recovery of demand. The manufacturing industry in Europe and the United States has gradually recovered since the unsealing of the epidemic, and the consumer demand for copper has increased. In the same period, the supply side of electrolytic copper is constantly disturbed, and both supply and demand support the spot on the strong side.

The rapid elimination of inventory is also confirmed. In the first half of this year, affected by the epidemic, LME copper stocks showed a step-by-step increase. Lun copper inventories have been removed more smoothly since mid-June, falling continuously from around 248000 tonnes, while LME copper inventories are now down to 77000 tonnes, a decline of nearly 70 per cent. And the proportion of warehouse receipts cancelled remains high, more than 60%. The proportion of low inventory superimposed high write-off warehouse receipts continues to strengthen spot tight expectations.

However, SMM believes that the possibility of another significant expansion of spot rising water is not high, mainly due to:

The rebound in overseas epidemics has added downside risks to the economy. In the context of weakening economic stimulus policies, the manufacturing recovery may not be able to continue the early momentum, and the growth momentum of copper consumption will be reduced.

LME inventories have recently shown a stabilization at the bottom and a slight rebound. Total LME inventories recorded a relatively low of 77000 tons as of Sept. 23, up slightly from 73000 tonnes on Sept. 9. At present, the domestic demand for US dollar copper is very low, and the Yangshan copper premium has fallen to the lowest level of the year, and the "delivery position" in the market is expected to heat up. Some traders said that if the premium continues to decline, some of the electrolytic copper originally sent to China may be transferred directly to the LME warehouse, so it is slightly difficult for LME 0-3 to re-rush the strong back structure.

Import and export Yangshan copper premium inventory supply and demand

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