Supply-Demand Imbalance Improves, Spot Premiums/Discounts Rise [SMM North China Spot Copper]

Today in Shandong, spot copper premiums/discounts rose by 50 yuan/mt, with the average reported at a discount of 320 yuan/mt. Copper prices pulled back sharply yesterday, which boosted downstream procurement sentiment. The increase in procurement volume consumed some spot cargo supply. Against the backdrop of previously weak market transactions, smelters continued with spot deliveries, becoming the core reason for the current tightness in spot supply. Overall, while the current spot tightness was partly driven by improved downstream procurement, the main cause was smelter delivery behavior, which is a short-term market phenomenon triggered by copper price fluctuations.

Looking ahead, the Shanghai spot copper market is anticipated to stay under downward pressure. Following yesterday's price drop, some northern suppliers diverted material to delivery warehouses, while downstream procurement increased, tightening regional supply. This has prompted inquiries from downstream buyers in Henan and Shandong into the Shanghai market, potentially offering near-term regional support in East China. However, cargoes locked at favorable import price ratios earlier are due to arrive post-holiday, boosting domestic supply. Meanwhile, a slightly widened nearby contango and continued supplier deliveries to warehouses will sustain pressure on spot liquidity. Even if lower prices spur some bargain-hunting, spot discounts are likely to persist tomorrow.

[SMM Shanghai Spot Copper] Tomorrow, the SHFE copper spot market is expected to remain under pressure. After copper prices declined yesterday, some suppliers in the north opted to ship to delivery warehouses, coupled with an increase in procurement volume from downstream enterprises, which collectively led to tighter spot supply in the northern market. Today, some downstream enterprises from Henan and Shandong have turned to the Shanghai market for inquiries, potentially providing some regional support to spot prices in east China in the short term. In terms of market structure, some price ratio cargoes locked in during the previous period when the import window was open are expected to arrive at ports after the holiday, which will increase domestic spot supply pressure. Meanwhile, the contango spread between nearby months has widened slightly, and suppliers' willingness to ship to delivery warehouses persists, which will continue to constrain liquidity in the spot market. If copper prices decline further, although it may stimulate some buying the dip demand, the market is expected to maintain a discount structure tomorrow.