SHANGHAI, Apr 28 (SMM) – Expectations for the peak consumption season fell through by the end of April, and the US dollar copper market was also sluggish. Comparing the performance of last year and the second quarter of this year, the trend of Yangshan copper premium is quite different. The import window remained close since the CNY holiday in February. Yangshan copper premium gradually declined without reaching the bottom. The average price of SMM Yangshan copper premium (warehousing receipt) stood at $48/mt as of April 23, down $29/mt from the highest level during the year.
The tepid foreign trade market was mainly due to the oversupply in the domestic market. Under the expansion of domestic smelting capacity and the relatively ample supply of blister copper, the output of domestic smelters in the first quarter was at a high level. However, the recovery of copper consumption was slow. The power sector has not yet shown a strong driving force for copper consumption so far, and the high copper prices after the holiday suppressed the orders of downstream processing companies. The upward transmission affected their enthusiasm for purchasing refined copper. In addition, the consumption of refined copper was squeezed by scrap copper and domestic demand can not support the opening of import price ratio. In terms of inventory, domestic inventories has not entered the decreasing cycle for a long time. Social stocks of refined copper in mainstream areas in China reached 323,600 mt as of April 23.
The pattern of weak domestic copper prices and strong overseas copper prices led to substantial losses in imports. The loss of spot imports expanded rapidly last week, reaching a level of 1,000 yuan at the weekend. With substantial losses, the demand for customs declaration imports was very weak, and the bonded area inventories increased to 389,700 mt.
In the case that the import price ratio did not improve for a long time, SMM learned that domestic smelters were converted to export profits, and most of the goods arrived in bonded warehouses without a large number of offshore. If the premium of Yangshan copper continues to decline while overseas maintains a back structure, the large loss of price ratio will further boost the export actions of domestic smelters. In addition, due to the extremely low price ratio, some of the refined copper originally scheduled to be sent to China may be transferred overseas for delivery. The increase in export volume and the month-on-month decrease in import volume will give a certain positive feedback on the price ratio, which will narrow the import loss.
