The widening of LC price spread fails to offset the deterioration of SHFE/LME price ratio, with Yangshan copper premiums falling sharply during the week [SMM Weekly Review of Yangshan Copper]

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This week (May 26-30), the weekly average price range of Yangshan copper premiums for B/L transactions was $92.6 to $117.4/mt, with QP June and an average price of $105/mt, down $3.6/mt WoW. The price range for warrants was $84.8 to $95.6/mt, with QP June and an average price of $90.2/mt, down $3.2/mt WoW, QP June. The CIF B/L price for EQ copper was $63.6 to $74.8/mt, with an average price of $69.2/mt, down $8.2/mt WoW, QP June. As of May 30, the SHFE/LME copper price ratio for the SHFE copper 2506 contract was 8.1605, with an import profit margin around -950 yuan/mt. As of Friday, LME copper 3M-Jun was in backwardation of $52.59/mt; the swap fee difference between June date and July date was in backwardation of $15/mt.

Currently, the actual price for high-quality ER copper warrants is $90/mt, with mainstream pyrometallurgy and domestic warrants priced at $80-85/mt, and SX-EW spot cargo hard to find. The price for high-quality copper B/L is $110-120/mt, with mainstream pyrometallurgy and domestic warrants priced at around $90-100/mt, and SX-EW spot cargo hard to find. The CIF B/L price for EQ copper is $50 to $60/mt, with an average price of $55/mt.

At the beginning of this week, as the LME-COMEX price spread returned to around $950-1,000/mt, the market once again saw buyers paying high prices for CME-registered B/Ls. Last week, the CME officially announced good deliveries of Onsan I and II copper cathode, temporarily boosting the premiums for copper cathode brands from South Korea, Chile, Australia, etc. However, overall, the price ratio continued to fall this week, with spot import losses widening to 1,000 yuan/mt, and domestic consumption showing no significant growth. Mid-week, rumors emerged in overseas markets that a major player had canceled a large amount of Russian copper, and the LME June-3M backwardation structure widened to $50/mt. Due to the above factors, the overall trend of imported copper premiums still showed a pullback. Among them, EQ B/Ls and domestic warrants saw larger declines, and the overall purchasing sentiment of downstream buyers was poor. Looking ahead to next week, if the price ratio continues to deteriorate, market participants may choose to deploy inter-market arbitrage strategies, and after premiums fall to low levels, some traders may restock at lower prices. Considering that the supply of imported copper remains tight from May to July, it is expected that Yangshan copper premiums will gradually stabilize after a short-term decline.

According to the SMM survey, as of Thursday (May 29), copper inventories in domestic bonded zones fell by 6,500 mt from the previous period (May 22) to 54,200 mt. Among them, bonded copper inventories in Shanghai fell by 4,800 mt to 49,500 mt; bonded copper inventories in Guangdong fell by 2,300 mt to 4,700 mt. The continuous decline in bonded area inventory this week was mainly due to large traders clearing their inventory through customs, while the volume of B/Ls arriving from the LME and entering the warehouse was relatively low. As a result, the overall inventory decline slowed down as expected. Looking ahead, as the SHFE/LME price ratio continues to decline, the market-driven volume of imports cleared through customs is expected to decrease, and the de-stocking rate of bonded warehouses is anticipated to continue to slow down.

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