Import Losses Continued To Narrow, Yangshan Copper Premiums Seen Rising

Yangshan copper premiums with a quotation period in July stood at $42-57/mt under warrants during June 26-30, with the average up $3.4/mt from June 21. Those stood between $41-57/mt under bill of lading with a quotation period in July, with the average up $2.6/mt. As of June 30, the SHFE/LME copper price ratio stood at 8.29, and import losses stood at 233 yuan/mt against the SHFE July copper contract.

Import losses continued to narrow during the week, and turned into import profit as of Friday. Quotes for warrants stood at high levels after the SHFE/LME copper price ratio improved. Sellers taking high profit previously through arbitrage operations raised their quotes for Yangshan copper premiums due to eased cash flow issues. On the bill of lading front, arriving shipments have increased recently, and the SHFE/LME copper price ratio has not recovered to the profitable range. Traded import premiums were well below quotes. There was barely any price spread between warrants and bill of lading.

Traded import premiums for high-quality pyro-copper currently stand at around $59/mt under warrants, and $50/mt for mainstream pyro-copper. Those for hydro-copper stand at $44/mt. On the B/L front, premiums stand at $59/mt for high-quality copper, $50/mt for mainstream pyro-copper, and $43/mt for hydro-copper.
This week, the mid-year settlement pressure of all links in the domestic industrial chain has weakened, and demand is expected to increase slightly. Meanwhile, the customs clearance of imported copper in early July will also increase. Overseas, the backwardation of LME copper slid due to the proportion of LME cancelled warrants falling from high levels, easing concerns over a short squeeze. Yangshan copper premiums are expected to rise in view of continued recovery of the SHFE/LME copper price ratio.