Copper Prices Rebound as SHFE/LME Price Ratio Falls: Will Yangshan Copper Premiums Turn Downward Again? [SMM Analysis]

Yangshan copper premiums began to rise in mid-July and, after nearly a month of gains, fell back again last week. Let's take a closer look at the current status and future trends of the imported copper market in the Shanghai bonded zone.

At the beginning of the week, market concerns about an economic recession in Europe and the US eased. The US retail sales data for July, released on Thursday (August 15), also exceeded market expectations, further alleviating market worries, and copper prices rose steadily. Due to the rise in copper prices, the SHFE/LME price ratio weakened significantly. As of 15:00 on Friday, the import profit had dropped to -526.21 yuan/mt, significantly dampening the willingness of downstream buyers in the imported copper market to take delivery.

The delay in the shipment of registered copper from South America affected the arrival of copper cathode in August, with most of the shipments coming from Japan and South Korea, concentrated at the end of August. Previously, bills of lading in the market were mostly bought at high prices to supplement the delayed long-term orders. Last week, there were very few offers for bills of lading in the imported copper market, and holders were firm in their offers. After the SHFE/LME price ratio weakened at the end of the week, downstream buyers could not accept high-priced sources, but holders still quoted high prices due to the limited market supply, resulting in very light market transactions, and Yangshan copper premiums also fell back from highs.

Looking ahead, due to the continuous destocking of domestic social inventories, which has been ongoing for five consecutive weeks, coupled with the expected production cuts at domestic smelters, copper prices are expected to be supported. Additionally, disruptions at the mine end continue to affect macro sentiment, and copper prices are expected to continue rising. In this context, there are concerns about the SHFE/LME price ratio in the imported copper market, and the ratio is expected to continue deteriorating, putting significant pressure on Yangshan copper premiums. However, due to the limited arrival of bills of lading in late August, sellers are expected to continue to hold firm on their offers, which will somewhat limit the decline in Yangshan copper premiums.