On the First Trading Day of the New Year, SHFE Copper Spot Premiums Rose Significantly [SMM Shanghai Spot Copper]

SMM January 5 News:

Today, the spot premiums/discounts for SMM #1 copper cathode against the SHFE copper 2601 contract were quoted at a discount of 30 yuan/mt to a premium of 100 yuan/mt, with the average premium at 35 yuan/mt, up 225 yuan/mt from the previous trading day. The SMM #1 copper cathode price ranged from 100,250 to 100,900 yuan/mt. In the morning session, the SHFE copper 2601 contract rose from around 99,500 yuan/mt to 100,800 yuan/mt. The contango spread between the nearby contracts was between 200-160 yuan/mt, and the import loss for the SHFE copper nearby contract was about 1,300 yuan/mt.

During the day, spot premiums surged. In the morning session, suppliers offered premiums of 60-150 yuan/mt, with some Changzhou-origin cargoes at premiums of 20-50 yuan/mt. As futures prices climbed, downstream buyers countered more noticeably, and premiums declined. Entering the second trading session, spot transactions shifted from premiums back to discounts, though some high-quality cargoes still traded at premiums.

Several factors contributed to the rise in spot premiums during the day:

1. Banks offered time deposits for the four non-trading days during the New Year holiday, allowing enterprises holding inventory to benefit from bank time deposits.

2. Before the year-end, smelters actively sold cargoes to improve cash flow, meet internal audit requirements, and fulfill capital turnover targets, preselling cargoes for the first half of January. After the holiday, even as social inventory built up, spot availability remained tight.

3. At the start of the new cycle, state-owned enterprises halted copper cathode trading and inventory releases before the year-end, resuming inventory rebuilding after the holiday, leaving fewer circulating cargoes available.

Overall, traders with inventory, considering the spot copper market conditions and their respective funding costs, held prices firm and were reluctant to sell. Combined with a slight rebound in market procurement sentiment compared to pre-holiday levels, spot transactions improved, leading to an overall increase in spot premiums/discounts and a shift from discounts to premiums.