Yangshan Copper Premiums First Declined and Then Rose in November: What Will Happen in December? [SMM Analysis]

As the year-end approaches, the trading atmosphere in the imported copper market in the Shanghai bonded zone has weakened. How did the market actually perform in November, and how will it change in December?

In November, Yangshan copper premiums first declined and then rose, with the market performing well mid to late November. In November, many traders in the imported copper market in the Shanghai bonded zone were close to meeting their import volume targets, and the policy subsidy quotas in some regions were already full, leading to a decrease in traders' purchasing enthusiasm. Coupled with copper prices fluctuating at highs, downstream purchasing demand was weak, resulting in sluggish transactions in the imported copper market in the Shanghai bonded zone. However, in mid-November, copper prices began to fall, the SHFE/LME price ratio quickly improved, and transactions in the imported copper market in the Shanghai bonded zone warmed up, leading to a rebound in Yangshan copper premiums. Subsequently, as the cancellation of copper semis export tax rebate subsidies was expected to start in December, many processing enterprises rushed to fulfill export orders, leading to a high demand for near-port B/L and warehouse warrants. Traders took this opportunity to sell in large quantities, and market transactions continued to improve.

Looking ahead to December, SMM expects that Yangshan copper premiums will find it difficult to maintain the continuous rebound trend seen in November. From the demand side, the rush to fulfill export orders has ended. Although copper prices are expected to remain relatively low, processing enterprises' orders are stable, and there is no need for large-scale procurement of copper cathode. Additionally, traders indicated that as the year-end approaches, to avoid holding inventory into the new year, daily trade volumes will be significantly reduced, except to meet downstream customers' procurement needs. According to SMM, there will be a large influx of goods from South America, Japan and South Korea in December, leading to overall substantial arrivals of imported copper. Therefore, the imported copper market in the Shanghai bonded zone in December is expected to exhibit a supply far exceeding demand, which is expected to exert significant pressure on Yangshan copper premiums.