Rapid destocking of social inventory, along with the impact of typhoon expectations coupled with the backwardation structure, supports a steady SHFE copper premium [SMM Shanghai Spot Copper]

SMM, July 9:

Spot #1 copper cathode against the current-month SHFE copper 2606 contract was quoted at a premium of 120–180 yuan/mt today, averaging a premium of 150 yuan/mt, up 15 yuan/mt from the previous trading day. In early trading, the SHFE copper 2607 contract consolidated and then edged down before rebounding. It opened at 102,220 yuan/mt, then mainly traded between 102,310 and 102,470 yuan/mt. The price briefly touched a high of 102,590 yuan/mt before edging down to an intraday low of 102,200 yuan/mt, and then rebounded ahead of the close to settle at 102,340 yuan/mt. The spread between the front-month and next-month contracts ranged from a Contango of 10 yuan/mt to a Backwardation of 50 yuan/mt, while the import profit margin for SHFE copper against the 2607 contract stood between a gain of 70 yuan/mt and 140 yuan/mt.

In the Shanghai region, sales sentiment for copper cathode was 3.20, up 0.14 MoM, and purchasing sentiment was 3.18, up 0.18 MoM; historical data can be accessed in the database. At the start of the morning session, suppliers offered standard-quality copper brands such as Lufang and Xiangguang at premiums of 140–160 yuan/mt, while Jinchuan ISA, Zhongtiaoshan, Tiefeng, Zijin, Dajiang HS, and Jinchuan ISA Yongchang were offered at premiums of 120–150 yuan/mt, showing pronounced quote divergence. High-quality copper brands, such as Jinchuan plate and Guixi, were offered at premiums of 180–200 yuan/mt. Registered SX-EW copper Esox was offered at a premium of 40 yuan/mt, and non-registered copper was offered at discounts of 70–50 yuan/mt. In the second session, low-priced cargoes became scarce in the market, and standard-quality copper was mostly traded at premiums of 130–160 yuan/mt.

Looking ahead to tomorrow, the impact of Typhoon Bavi is expected to persist, with pre-stockpiling demand from downstream copper processing enterprises still being released. Both purchasing and sales sentiment continued to rebound, and market trading was relatively active. SMM data showed that social inventory in the Shanghai region recorded 104,800 mt, down 17,600 mt MoM, while social inventory in the Jiangsu region recorded 31,000 mt, down 5,000 mt MoM. According to SMM, as social inventory rapidly declined and the spread between the front-month and next-month contracts shifted into a Backwardation structure, the carry return for suppliers holding positions for delivery has risen. Some suppliers expect near-term premiums to still have upside room, thus showing a weak willingness to sell at low prices. Although the import window has opened, the near-term increment in the spot market is limited considering logistics and customs clearance lags. On balance, spot copper against the SHFE 2607 contract is expected to maintain its current premium level tomorrow.