Why Did SHFE Spot Copper Premiums/Discounts Surge at the Start of the New Year? [SMM Analysis]

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       During the week crossing into 2025, SHFE spot copper premiums showed a "strong start," with standard-quality copper quotes once approaching 100 yuan/mt and high-quality copper premiums exceeding 100 yuan/mt. However, the high premiums were unsustainable, pulling back on the second trading day. As we enter the second trading week of the new year, can the high spot premiums persist?

       At the end of December, suppliers actively sold off goods to recover funds, turning spot premiums into discounts, which continued to widen. However, some traders had already built up inventories at low prices, preparing for sales after the new year. By the afternoon of December 31, suppliers were actively quoting for January 2, creating a tight supply in the market. Under these circumstances, the high spot premiums on the first trading day of 2025 were not surprising.

       According to SMM data, as of this Thursday, copper cathode inventories in Shanghai recorded 79,100 mt, showing an increasing trend MoM. However, market circulation of goods remained insufficient, prompting traders to stand firm on quotes, resulting in a "strong start" on the first day of the new year. Nonetheless, actual downstream procurement demand was weak, mainly due to active restocking at low spot discounts before the holiday.

       SMM data showed that this week, the operating rate of copper cathode rod fell 8.49% MoM, while the operating rate of secondary copper rod dropped 6.49% MoM. Spanning 2024-2025, most enterprises focused on year-end fund recovery and arranged maintenance, leading to varying degrees of production cuts or shutdowns. During this period, the pace of downstream orders and picking up goods also slowed, resulting in an unexpected decline in the operating rate of copper cathode rod. Therefore, actual consumption this week was poor, and spot premiums fell on Friday, lacking actual downstream consumption support. SMM expects the operating rate of copper cathode rod to rebound to 76.65% next week. Additionally, with copper prices pulling back to around 73,000 yuan/mt by the end of the week and raw material inventories being digested, downstream procurement is expected to recover, providing support for spot premiums. However, considering actual transactions, spot premiums are expected to hover around 50 yuan/mt.

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