Inventory destocking combined with a slight demand uptick at the start of the month drives SHFE copper spot premiums to climb steadily [SMM SHFE Copper Spot Weekly Review]

This week, SHFE copper spot premiums flipped from discounts to premiums, climbing steadily overall. Early in the week, the pressure to sell off cargo at month-end was largely released, and destocking of social inventories supported a narrowing of discounts, with suppliers showing a stronger willingness to hold prices firm. Entering July, a new monthly procurement cycle began, downstream restocking demand was released intensively, and buying and selling sentiment picked up markedly, shifting the spot market from discounts to premiums. From mid-week to the weekend, inventories continued to destock, with social inventories in Shanghai and Jiangsu regions posting significant weekly declines, pushing the center of spot premiums further upward. SMM data showed that on July 2, Shanghai social inventory recorded by SMM stood at 126,500 mt, down 7,700 mt from the previous Thursday; Jiangsu inventory stood at 36,200 mt, down 5,000 mt from the previous Thursday, both showing a destocking trend.

Looking ahead to next week, SHFE spot premiums are expected to maintain a relatively strong pattern, but the upside room may be limited by high price pressure. On the supply side, inventories have been continuously destocking recently, with tight available spot cargoes, while suppliers remain firm in holding prices, making low-priced sources hard to find. The import window remained closed, limiting replenishment from overseas sources, and the short-term tight supply situation is unlikely to reverse quickly. On the demand side, the early-month procurement cycle is still ongoing, with downstream rigid demand continuing to be released, but after copper prices rose, buying sentiment pulled back somewhat, weakening the willingness to chase higher prices. Regarding the price spread structure, the inter-month Contango spread maintained a certain width, supporting suppliers’ willingness to hold positions for delivery, which provides support for spot premiums. Overall, under the combined effect of inventory destocking and suppliers holding prices firm, SHFE spot premiums against the 2607 contract are expected to remain at premiums next week, with the overall strong trend continuing. However, further upside room for premiums will depend on downstream’s actual acceptance of high prices and subsequent inventory changes.