Why were the spot premiums of SHFE copper in July so high?

In July, copper prices jumped initially and then pulled back. After entering the SHFE copper 2508 contract, the price spread between futures contracts shifted from BACK to Contango structure, and spot consumption weakened. Why did Shanghai spot copper premiums remain high?

Supply Side:
In July, SMM copper cathode inventories continued to decline, and domestic supply was tight amid limited imports. Shipments from refineries that usually deliver to Jiangsu Province decreased due to factors such as maintenance, leading to tight supply in the region. In Shanghai, domestic supply was limited, and in the second half of the month, long-term contract deliveries occupied part of the supply. Although refineries supplemented the supply when Shanghai spot copper premiums rose, it was quickly absorbed. At month-end, there was an arbitrage opportunity in bank discounts, causing most "trade long-term contract" cargoes to flood into the bill market, tightening the market's circulating supply. Shanghai spot copper premiums almost maintained at 200 yuan/mt. However, actual downstream transactions were differentiated.

Consumption Side:
In July, the operating rates of most copper semis fell to low levels, with both copper rod and copper pipe & tube experiencing declines. After copper prices fell below 78,500 yuan/mt, downstream consumption improved slightly, but did not continue to increase. Amid the off-season performance, July consumption could not support further increases in spot premiums. However, the current Contango structure between futures contracts discouraged suppliers from selling at low prices, leading to occasional reluctance to budge on prices in July.

Outlook for August:
Against the backdrop of the implementation of US tariffs, there is a concern about increased imports in the future, with imports expected to rise. However, logistical constraints in Africa are expected to limit the supply of non-registered cargoes. The consumption side remains in the off-season, and it is difficult for copper prices to fall below 77,000 yuan/mt, with consumption expected to remain sluggish. In August, premiums and discounts are expected to range from a discount of 80 yuan/mt to a premium of 250 yuan/mt.