What is behind the rise in Shanghai spot copper premiums at the end of November? [SMM Analysis]

As the month-end approached, Shanghai spot copper premiums against futures gradually increased from parity to over 50 yuan/mt. What are the reasons behind this?

Two weeks ago was the concentrated delivery week for long-term contracts of spot copper cathode in November. With the month coming to an end, there was room for invoice business, and the trade market showed tight supply in the latter half of the week. Additionally, with a decrease in concentrated arrivals of imported cargoes and a reduction in domestic shipments to social warehouses, the inflows into social warehouses were far below the outflows from warehouses. According to SMM data, as of Monday last week, inventory in Shanghai decreased by 22,700 mt compared to November 21. During the week, cargoes with invoices dated this month were in short supply, market demand increased, and prices for cargoes with invoices dated next month also rose.

Observing the Shanghai-Guangdong price difference, the mainstream price spread for copper cathode between the two regions was nearly 300 yuan/mt, leading to the phenomenon of Shanghai supplies being transferred to South China. Additionally, non-registered cargoes also showed some movement, resulting in a reduction of non-registered cargoes in the Shanghai area. Downstream procurement prices rose accordingly, keeping other mainstream copper sources firm.

Due to concerns about a US tariff hike, import traders suspended the purchase of US secondary copper raw materials, exacerbating the tight supply of domestic raw materials. The price difference between copper cathode and copper scrap continued to narrow, further promoting the consumption of copper cathode.

Although the operating rate of copper cathode rod slightly declined WoW last week, sufficient production schedules in the previous period basically ensured normal procurement and operation last week. Additionally, the tight supply of copper scrap boosted the consumption of copper cathode, keeping spot copper prices in Shanghai firm.