A significant increase in inventory after the holiday led to a sharp decline in spot premiums, but they are expected to rebound next week [SMM Weekly Review of Spot Copper Cathode in South China]

SMM June 5 News:

Guangdong region: This week, the premiums and discounts in the region showed a trend of hitting bottom and then rebounding. After the Dragon Boat Festival, inventory in Guangdong continued to rise sharply, increasing by 14,200 mt in less than a week. Affected by this, suppliers actively lowered prices to sell, causing premiums to drop significantly. As concentrated arrivals temporarily came to an end and inventory pulled back again, spot premiums also showed a trend of stopping falling and rebounding. As of Thursday, high-quality copper was quoted at a premium of 50 yuan/mt, a decrease of 50 yuan/mt from last Thursday. Standard-quality copper was quoted at a discount of 80 yuan/mt, a decrease of 110 yuan/mt from last Thursday. SX-EW copper was quoted at a discount of 130 yuan/mt, a decrease of 110 yuan/mt from last Thursday. On Thursday, the price spread between premiums and discounts for standard-quality copper in Shanghai and Guangdong was 80 yuan/mt higher in Shanghai, with a relatively small spread, leaving no room for cross-regional cargo transfers. According to SMM statistics, as of Thursday, the total inventory in Guangdong warehouses was 23,600 mt, a significant increase of 11,700 mt from last Thursday. Warrants totaled 7,100 mt, an increase of 4,300 mt from last Thursday. Given the relatively large spot discounts, most suppliers chose to transfer to delivery warehouses. Specifically: This week, warehouse arrivals were 22,200 mt/week, an increase of 11,500 mt/week from last week, significantly higher than the annual average (14,000 mt/week). During the Dragon Boat Festival, downstream consumption was average, and the volume of copper sent to warehouses by smelters increased. Outflows from warehouses were 10,500 mt/week, a decrease of 1,300 mt/week from last week, below the annual average (14,200 mt/week). During the Dragon Boat Festival, some copper processing enterprises took 1-2 days off, leading to a decline in capacity utilization rate.

Looking ahead to next week, we understand that both imported and domestically produced copper arrivals are expected to decrease next week compared to this week, and total supply is expected to be lower next week than this week. In terms of downstream consumption, the narrowing of the price spread between futures contracts is stimulating downstream enterprises to replenish inventory. Additionally, without the impact of the Dragon Boat Festival holiday, demand is expected to increase next week compared to this week. Therefore, we believe that next week will see a situation of reduced supply and increased demand, with weekly inventory expected to decline and premiums expected to fluctuate and rise.

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