Inventories and premiums of copper cathode fell simultaneously in Guangdong

SHANGHAI, June 24 (SMM) - Guangdong saw extensive rainfall, and copper cathode inventories decreased. As of June 23, the copper cathode inventories totalled 89,400 mt in Guangdong, down 14,300 mt from the peak level on May 19. The stock decrease accelerated, falling 9,800 mt in the previous 5 days.

Normally, the inventory decline should cause the increase in spot premiums, but the premiums in Guangdong fell along. The standard-grade copper prices stood at a discount of 180 yuan/mt on June 23, with the premium down 200 yuan from June 18.

The decline in premiums may be caused by several factors.

The average daily goods arrival volume stood at 2,400 mt in Guangdong, down 800 mt on the year, which mainly led to the decrease in total inventories.

At the same time, the consumption did not increase significantly despite the sharp drop in copper prices. The average daily outbound volume was around 2,800 mt in Guangdong, down around 400 mt from the same period last year. Thus the premiums were lowered.

According to SMM survey, the increase in the operating rates of copper rod enterprises was limited, and some companies planned to halt part of the production due to the high finished product inventory. Operating rates of copper tube and pipe enterprises also dropped significantly in the off-peak season of production.

Some holders actively shipped goods at lower prices to withdraw funds in the mid-year, and a large number of warehouse receipts flowed out of the market after the contract settlement, which also dragged down the premiums. There are still 69,000 mt of copper cathode under warrants in Guangdong, a high level in recent years.

The premiums are expected to keep falling until end-June, likely to rebound markedly in early July.