Re-export B/L trade suspended, market returning to SHFE/LME price ratio-driven logic [SMM Yangshan Copper Weekly Review]

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        This week (July 7-11), the weekly average price range for Yangshan copper premiums B/L transactions was $48.4-77.6/mt, with QP in August and an average price of $63/mt, up $13.6/mt WoW. Warrant prices ranged from $30 to $45.2/mt, with QP in July and an average price of $37.6/mt, up $7.6/mt WoW. EQ copper CIF B/L prices were $7.6-25.2/mt, with QP in August and an average price of $16.4/mt, up $18/mt WoW. As of July 4, the SHFE/LME copper price ratio for the SHFE copper 2507 contract was 8.1083, with an import profit margin of around -550 yuan/mt. As of Friday, LME copper 3M-July was in Contango of $0.84/mt, and the swap fee difference between July and August dates was approximately BACK $1.3/mt.

        Currently, the actual price for high-quality ER copper warrants is $50/mt, with mainstream pyrometallurgical and domestic warrants priced at $40-45/mt. SX-EW spot cargoes are hard to find. The actual price for high-quality copper B/Ls is $74/mt, with mainstream pyrometallurgical and domestic B/Ls priced at around $40-60/mt. SX-EW spot cargoes are hard to find. CIF B/L EQ copper prices range from $14/mt to $30/mt, with an average price of $22/mt.

        This week, the Trump administration announced a 50% tariff on copper starting August 1. After the announcement, the price spread between LME 3M contracts and COMEX widened to over $2,500/mt, and trade actions involving B/Ls re-exported from China to the US basically halted. Due to the significant decline in LME copper prices, the SHFE/LME copper price ratio improved, and the market returned to price ratio logic, with Yangshan copper premiums halting their decline and rebounding. The price center for B/Ls in late July and early August is expected to rise, while the price spread between brands narrows, and spot trade activity increases significantly compared to before. Looking ahead to next week, the continuous decline in domestic premiums and discounts makes it difficult to fully open the import price ratio, and the upward momentum for Yangshan copper premiums is limited.

        According to the SMM survey, on Thursday (July 10), domestic bonded zone copper inventories increased by 7,700 mt from the previous period (July 3) to 78,800 mt. Among them, Shanghai bonded zone inventories rose by 7,700 mt to 70,700 mt, while Guangdong bonded zone inventories fell by 1,800 mt to 8,100 mt. The continuous increase in Shanghai bonded zone inventories this week was mainly due to concentrated arrivals at some warehouses. However, overall, due to the decline in LME copper prices, the SHFE/LME copper price ratio improved significantly, and some downstream companies actively increased imports, leading to an increase in the amount of bonded zone inventories flowing into the domestic market. Some Guangdong bonded zone inventories were shipped to LME Asian warehouses as originally planned, resulting in a decrease in Guangdong bonded zone inventories. Looking ahead, port arrivals are expected to be low in the mid-to-late July. After a significant decline in domestic premiums and discounts, the import window has closed again. Given the weak supply and demand, it is expected that the inventory in bonded areas will experience a slight destocking.

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