SHFE Copper Backwardation Expands to 600 Yuan/mt for Next-Month Contract, Arbitrageurs Rush to Push Down Premiums [[SMM Shanghai Spot Copper]]

Published: May 9, 2025 14:46

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[SMM Spot Copper] Next week will mark the countdown to delivery. Currently, there is still a significant disparity between the number of open interest hands for the current month and the deliverable warrants. It is anticipated that spot copper will trade at a discount amid high price spreads between futures contracts.

SMM News on May 8:

Today, spot premiums for SMM #1 copper cathode against the SHFE copper 2505 contract were reported at a range of RMB 20-140 yuan/mt, with an average premium of RMB 80 yuan/mt, a decrease of RMB 145 yuan/mt from the previous trading day. The SMM #1 copper cathode price was RMB 78,070-78,340 yuan/mt. In the morning session, the SHFE copper 2505 contract continued to decline from RMB 78,650 yuan/mt, with a reduction in open interest, reaching a low of RMB 78,010 yuan/mt. It eventually fluctuated rangebound between RMB 78,100-78,200 yuan/mt. During the morning trading session, the price spread between futures contracts (BACK) for the next month rose from RMB 480 yuan/mt to over RMB 600 yuan/mt. The import loss for SHFE copper in the current month approached RMB 200 yuan/mt.

To achieve arbitrage opportunities in the price spread between futures contracts, suppliers actively lowered spot premiums during the day. In the early morning session, suppliers quoted premiums of RMB 100-150 yuan/mt for mainstream standard-quality copper, RMB 160-220 yuan/mt for high-quality copper, and RMB 50-80 yuan/mt for SX-EW copper. As transactions were concluded at a premium of RMB 100 yuan/mt, suppliers rushed to lower premiums to RMB 50-100 yuan/mt. Entering the second trading session, with a significant increase in open interest for the June contract and a slight narrowing of the price spread structure, suppliers continued to lower premiums. However, by this time, just-in-time procurement demand had ended, and transaction prices among traders continued to decline to premiums of RMB 20-30 yuan/mt.

Next week, as the delivery countdown begins, the current month's open interest remains significantly higher than the deliverable warrants. It is expected that spot premiums will turn into discounts amid high price spreads between futures contracts.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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