Warrants restrict the circulation of supply, SHFE copper premiums rise sharply [SMM Shanghai spot copper]

SMM News on May 16:

Today, the spot price of SMM #1 copper cathode against the current-month 2506 contract was reported at a premium of 420-470 yuan/mt, with an average quoted premium of 445 yuan/mt, up 425 yuan/mt from the previous trading day. The SMM #1 copper cathode price ranged from 78,740 to 78,920 yuan/mt. In the morning session, SHFE copper traded above the daily average line, experiencing minor fluctuations within a narrow range. After briefly touching 78,480 yuan/mt, it pulled back to around 78,350 yuan/mt. The inter-month BACK price spread fluctuated between 420-440 yuan/mt, with the current-month SHFE copper imports incurring a loss of approximately 700 yuan/mt.

As the day officially entered the SHFE copper 2506 contract period, most of the supply was backlogged in warehouses in the form of warrants, leading to tight spot market liquidity. Suppliers held firm on their quotes. Early in the session, mainstream standard-quality copper was actively traded at a premium of 430-450 yuan/mt, while high-quality copper was traded at a premium of 460-480 yuan/mt, and Jinchuan (plate) and others were traded at a premium of 460 yuan/mt. Non-registered supply was initially subject to bargain down purchasing prices by downstream buyers from a premium of around 300 yuan/mt to 280-300 yuan/mt. Entering the main trading session, the supply of mainstream standard-quality copper was tight, with active trading observed in Changzhou at a premium of 380-400 yuan/mt. Towards the end of the morning trading session, quotes for JCC, Xiangguang, and others, available for cargo pick-up on the same day, were at a premium of 450-480 yuan/mt amid tight supply and numerous inquiries.

Looking ahead to next week, the outflow of warrants on Tuesday and Wednesday is expected to exert downward pressure on premiums. It is anticipated that there will be a gradual pullback risk for premiums to around 400 yuan/mt next week. However, downstream purchasing at lower prices is expected to boost market trading activity.