The semi-annual settlement has passed. Will spot premiums of SHFE copper be ready to take off? [SMM Analysis]

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       The continuously declining spot premiums of SHFE copper surged rapidly in the latter half of the week. What caused this?

       In the latter half of the month, Russian cargoes arrived intermittently, coupled with the continuous outflow of warrants after delivery. Suppliers sold at low prices, leading to a sustained decline in SHFE copper spot premiums. The destocking pace slowed in Shanghai, while it was more pronounced in Jiangsu, primarily because nearby smelters focused on exports, resulting in reduced domestic cargo inflows.

       Coinciding with the mid-year settlement, suppliers actively offloaded inventory before June 26 to meet inventory assessments and fund recovery needs, triggering a price collapse in spot premiums. Downstream players, sensing the potential for future premium increases, stocked up on raw materials if financially capable.

       However, as the LME structure continued to widen, surging LME prices drove SHFE copper above the 80,000 threshold. Yet, under these conditions, the price spread between SHFE copper futures contracts showed limited expansion. After the mid-year period ended, suppliers again refused to budge on prices, awaiting H2. Thus, today saw premiums and copper prices "soaring together."

       Will SHFE copper sustain high premiums in July? As the new half-year begins next week, most companies, flush with funds, may either build inventory or hold back sales. Given the substantial export plans of smelters in July, domestic supply is expected to tighten. With most imported cargoes being non-registered, deliverable supplies may grow scarce. However, attention should be paid to increased north-to-east China cargo flows, which could pressure east China premiums. Premiums in July are likely to dip first before rising.

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