Widening price spread between futures contracts prompts suppliers to take profits through arbitrage, while spot cargo is sold at low prices, turning contango into backwardation [SMM Shanghai spot copper]

SMM News on June 13:

       Today, the spot price of SMM #1 copper cathode against the current-month 2506 contract was quoted at a discount of 30 yuan/mt to a premium of 100 yuan/mt, with an average quoted premium of 35 yuan/mt, down 60 yuan/mt from the previous trading day. The SMM #1 copper cathode price ranged from 78,790 to 79,120 yuan/mt. In the early session, the SHFE copper 2506 contract briefly jumped initially and then pulled back, fluctuating between 78,820 and 78,920 yuan/mt. However, it briefly rose to 78,970 yuan/mt before entering the second trading session, then began to decline, touching a low of 78,500 yuan/mt near the morning close and closing at 78,600 yuan/mt. The backwardation (BACK) price spread between futures contracts for the next month widened to 300-380 yuan/mt in the early session, but then narrowed to fluctuate between 200-280 yuan/mt as arbitrageurs took profits and exited the market.

       During the day, due to the widening of the price spread between futures contracts, suppliers actively sold their cargoes when the BACK spread was high. In the early session, when the BACK spread was between 300-380 yuan/mt, cargoes from Japan and South Korea were traded at a discount of 50 yuan/mt. Subsequently, as the price spread between futures contracts narrowed and the delivery date approached, the availability of standard-quality copper cargoes in Shanghai and Changzhou became tight. Coinciding with downstream procurement and stockpiling on Friday, cargoes from producers such as Tiefeng, Zhongtiaoshan PC, and Dajiang PC were traded at a discount of 20 yuan/mt to parity. In recent days, the price spreads between various standard-quality copper cargoes have narrowed, with cargoes from Xiangguang, Lufang, and JCC being traded near parity. Non-registered cargoes were in short supply during the day, trading at a discount of 120 yuan/mt. SX-EW cargoes were also in tight supply, with only BMK-type cargoes available at a discount of around 60 yuan/mt.

        Looking ahead to next week, Monday will be the last trading day for the SHFE copper 2506 contract, and the price spread between futures contracts is expected to fluctuate frequently. Suppliers will actively quote prices for the next-month contract, with quotes expected to start at a premium of 100-150 yuan/mt against the SHFE copper 2507 contract.