Available spot cargoes tightened, Yangshan copper premiums firm
Yangshan copper premiums with a quotation period in April stood at $49-63/mt under bill of lading during March 4-7, with the weekly average up $6/mt from a week earlier to $56/mt. Those stood between $51-67/mt under warrants with a quotation period in March, with the weekly average up $7.5/mt to $59/mt. Import premiums for EQ copper with a quotation period in April stood at $16-20/mt, cif, with the average of $18/mt, up $5/mt. As of 15:00 CST March 7, the SHFE/LME copper price ratio stood at 8.12, and import losses stood at around 391.46 yuan/mt.
During the week, the import losses against the SHFE April copper contract expanded from 300 yuan/mt at the beginning of the week to around 400 yuan/mt. However, the Yangshan copper premiums were rising,and the market offers continued to be strong. Strong consumption after Chinese New Year holiday, coupled with global logistics disruptions especially the congestion at African ports, resulted in low shipments arrivals in March. Although the import price ratio has not improved significantly, due to the tight supply of cargoes in the spot market, cargo sellers raised premiums. Buyers purchased on demand, and the traded import premiums continued to rise. From a fundamental perspective, LME copper inventories continued to decline to around 110,000 mt, but the contango structure has not narrowed, and discounts in China’s domestic spot markets have not improved. Finished copper rod inventories accumulated during the week amid the slow recovery pace of end-user consumption. Domestic social inventories also continued to accumulate. These, coupled with the recent macroeconomic issues, will prevent the SHFE/LME copper price ratio from improving in the short term.
There will still be demand for long-term orders in late March. If large traders start replenishment, the Yangshan premiums will rise.
As of March 7, copper inventories in the domestic bonded zones grew 3,700 mt from February 29 to 44,500 mt, according to the latest SMM survey. Copper inventories in the Shanghai bonded zone added 1,000 mt to 40,800 mt, and inventories in the Guangdong bonded zone advanced 300 mt to 3,700 mt. Theinventory accumulation of domestic bonded warehouses slowed down as expected in the week ending March 8. Copper import was profitable compared to spot copper in Shanghai, stabilising shipments to downstream buyers. The previous reopening of the import window stopped shipments to bonded zone. It is expected that domestic shipments of cargoes sent to bonded warehouses will increase slightly in the week of March 11, but it is unlikely to see an increase in arriving shipments of seaborne cargoes. As the delivery week approaches, it means that cargoes with a quotation period in March will be taken, thus the accumulation of domestic bonded inventory is expected to remain low.
Please do not hesitate to contact Jean at jeantang@smm.cn or 86-19946295759 if you have any question or inquiry.
