Spot trades quiet before picking up; downstream buyers stood on the sidelines

SHANGHAI, Apr 19 (SMM)—Quotes were mixed in Shanghai due to delivery last week. As the price spread between the SHFE front-month and next-month contract expanded, spot premiums over the SHFE front-month copper contract reached around 100 yuan/mt at the beginning of the week. Spot discounts over the SHFE next-month contract stood at around 100 yuan/mt with the approach of delivery. However, sellers and buyers were at odds amid weak trades under long-term contracts ahead of delivery. Spot quotes returned to big discounts on Friday amid significant volatility in SHFE copper prices after delivery and significant inventory increase in Shanghai. Most of the trades occurred among traders.

In Shandong, spot quotes rose initially and weakened. Some smelters quoted with discounts early last week. Spot premiums over the April contract rose to up to 100 yuan/mt due to the approach of delivery and the contango of 150-180 yuan/mt of the SHFE next-month contract over the SHFE front-month contract.  Spot discounts returned to 150 yuan/mt on Friday.

In north China, spot premiums surged before falling last week. Spot copper was quoted with discounts of 270-210 yuan/mt, or an average discount of 240 yuan/mt, on April 9, and was quoted with discounts of 340-260 yuan/mt, or an average discount of 300 yuan/mt on April 16, down 60 yuan/mt. Sellers refrained from selling off without inventory pressure, causing spot premiums to rise in the first four trading days of the week. Sharp gains in SHFE copper prices and a big price spread between the SHFE front-month and next-month contracts accounted for declines in spot premiums on Friday. Premiums are expected to edge up this week unless SHFE copper prices rebound significantly.

In Guangdong, spot quotes fell amid higher inventory early last week and the approach of delivery combined with a wider price spread between the SHFE front-month and next-month contract raised spot premiums noticeably in the middle of the week. High SHFE copper prices and the big price spread lowered spot premiums sharply after delivery.  As of April 16, spot discounts for high-quality copper fell 110 yuan/mt from April 9 to 70 yuan/mt, and discounts for standard-quality copper stood at 180 yuan/mt, a decline of 160 yuan/mt. Hydro-copper was quoted with discounts of 230 yuan/mt, 160 yuan/mt lower than a week earlier. On Thursday, the price spread on standard-quality copper between Shanghai and Guangdong remained unchanged at 20 yuan/mt, leaving no opportunities for cargo transfer. As of Friday April 16, total inventories in Guangdong stood at 81,900 mt, an increase of 9,027 mt from April 9, growing for two consecutive weeks. More shipments arrivals than shipments from warehouses accounted for the increase. Arriving shipments increased to 29,100 mt, well above the weekly average of 18,200 mt for 2020, driven by concentrated arriving shipments and deliveries by smelters ahead of delivery. Shipments from Guangdong increased around 6,000 mt to 19,900 mt, marginally above the weekly average of 18,100 mt in 2020. Resumption of copper rod plants drove the growth. Premiums are expected to rise this week. Increased shipments arrivals early in the week are likely to lower premiums but premiums should rebound amid stable copper prices and improvement in downstream consumption.