Yangshan Copper Premiums Surged before Falling with the Improvement of the Price Ratio

SHANGHAI, Jun 27 (SMM) - Yangshan copper premiums stood at $61-85/mt under warrants during June 20-June 24, and between $60-78/mt under the bill of lading, with a quotation period of July. The quotation refers to the prices of goods arriving at ports in the first half of July. As of June 24, the SHFE/LME copper price ratio stood at 7.63. 

The Fed raised the interest rate by 75 basis points, strengthening the expectation of a slowdown in global economic growth. The hawkish speech of the Fed later continued to plunge the financial market. Copper prices fell sharply in anticipation of the marginal weakening of the global economic development prospects, and the SHFE/LME price ratio did not change much. Due to the high premiums in China, the spot imports remained profitable, pushing up the purchasing demand in the import market. Quotes under warrants were relatively firm as the spot imports remained profitable, and the market held certain confidence toward the short-term price ratio. As of June 24, Yangshan copper premiums were quoted at $61-85/mt under warrants. The average price was $73/mt, $4/mt higher than the previous Friday June 17. Quotes under B/L stood at $60-76/mt. The average price was $68/mt, $0.5/mt higher than the previous Friday June 17. In the future, the overall copper prices may enter the downward cycle due to the interest rate hikes overseas. In China, thanks to the policy to stabilise the economy, the social inventory was low, and it decreased slightly last week, which may support the prices in China to some extent. SMM expects that the price ratio may be relatively high, and the Yangshan copper premiums will be stable with some upward potential.

Last week, the premiums of high-quality pyro-copper were around $85/mt under warrants, and mainstream pyro-copper and hydro-copper were quoted at $78/mt and $61/mt respectively. The high-quality copper under the bill of lading was quoted at $76/mt, and that of mainstream pyro-copper and hydro-copper were $70/mt and $60/mt respectively. 

Copper inventories in domestic bonded zones increased by 2,400 mt from last Friday June 17 to 303,600 mt as of June 24, according to SMM survey. The inventory in the Shanghai bonded zone rose by 1,200 mt to 271,500 mt WoW, and that in Guangdong added 1,200 mt to 32,100 mt WoW. Last week, shipments flowing in and out of the bonded warehouses increased. Spot imports have remained profitable since two weeks ago. Domestic importers have actively moved the goods in the bonded warehouses into China, including many non-standard and unregistered goods. Goods arrived at ports in a centralised way last week, so the inflow into the warehouses increased WoW.