Will the premium of SHFE copper rise sharply in July?

The continuously declining spot premiums of Shanghai spot copper surged rapidly in the latter half of the week. What was the reason behind this?

Later this month, Russian cargoes arrived in stages, coupled with the continuous outflow of warrants after delivery. Suppliers sold at low prices, causing the spot premiums of Shanghai spot copper to continue to decline. The inventory drawdown in the Shanghai region slowed down today, with a more noticeable slowdown in the Jiangsu region. This was mainly because smelters were basically arranging exports, and the inflow of domestically produced cargoes showed a decline.

Coinciding with the semi-annual settlement, before June 26, suppliers were actively selling to meet inventory assessment and capital return requirements. The spot premiums collapsed, and downstream players also sensed the sentiment of rising premiums in the future market. Customers with financial strength stocked up on raw material inventories.

However, as the LME structure continued to widen, overseas market prices surged rapidly, driving the domestic market to break through the 80,000 yuan/ton threshold. Nevertheless, under this background, the price spread between futures contracts of SHFE copper was unlikely to expand significantly. After the semi-annual period ended, suppliers once again refused to budge on prices, waiting for the second half of the year to arrive. Hence, today's premiums and copper prices "soared together."

Can Shanghai spot copper maintain high premiums after entering July? Next week marks the beginning of the second half of the year, and most enterprises have sufficient funds to either build inventories or refuse to budge on prices and hold back sales. Considering that smelters still have a large number of export plans for July, domestic supply is bound to be tight. Against the backdrop of most imported cargoes being non-registered, deliverable cargoes will become scarce. However, attention should be paid to the pressure on east China premiums brought about by the increased flow of northern cargoes to east China. It is expected that premiums in July will first decline and then rise.