SHFE Spot Copper Premiums Surge Repeatedly Before Showing Fatigue: Is the Pre-Holiday "Stirring Things Up" Over? [SMM Analysis]

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       Since the beginning of 2025, SHFE spot copper premiums have surged. On the first trading day of the new year, the average spot premiums/discounts for SMM #1 copper cathode reached as high as 95 yuan/mt, compared to a discount of only 20 yuan/mt on the last trading day of 2024. At the year-end, suppliers had the need to clear inventory and recover funds, leading to spot transactions at discounts to futures. However, traders purchased at low prices to stockpile inventory in preparation for the new year, and the long-term contract negotiations for 2025 copper cathode had yet to be finalized, resulting in high premiums on the first trading day of 2025.

       This week, the SHFE copper 2501 contract is expected to undergo contract rollover and delivery. High spot premiums do not support the conversion of large amounts of spot cargo into warehouse warrants for delivery. Additionally, with the conclusion of the SHFE copper 2501 contract, the fulfillment of long-term contracts signed in 2024 is also nearing completion. As downstream stockpiling for the Chinese New Year is mostly finished, demand in the spot market is gradually weakening. High premiums are "threatened," showing a pullback during the day.

       A brief review of this round of high premiums shows that at the start of the new year, the availability of circulating supply in the Shanghai region tightened, and inventory continued to decline, mainly due to limited domestic arrivals. Additionally, high premiums in Guangdong and the Shanghai-Guangdong price spread attracted smelters to ship supplies southward, further limiting the availability of circulating supply in Shanghai and driving premiums higher.

       However, last week, a noticeable price spread emerged between Shanghai and Jiangsu. Some downstream buyers shifted from bargain down purchasing prices in Jiangsu to the South China region to profit from the price difference. As supply in South China increased and prices in Jiangsu "rose accordingly," the Shanghai-Jiangsu price spread gradually narrowed.

       Notably, during the rise in copper prices, the price difference between primary metal and scrap widened again, suppressing some downstream purchase willingness for copper cathode. The high spot premiums for copper cathode further lost support.

       Considering the above factors, it is expected that spot premiums will pull back across regions after entering the SHFE copper 2502 contract trading.

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