Short supplies, weak consumption widen price spreads between high, lower-quality copper

SHANGHAI, Dec 6 (SMM) – The spread between high-quality copper and hydro-copper, a kind of copper with more impurities, widened to the highest in close to two years on Tuesday December 4 as tight supplies bolstered high-quality copper premiums and a rush to cash in among sellers expanded hydro-copper discounts.

From the middle of November, the Shanghai spot copper market has seen the price spreads between high-and lower quality materials widening, to a peak of 315 yuan/mt on Tuesday, SMM assessments showed.

A closed import arbitrage window deterred importers from moving their high-quality cargoes to the domestic spot market while domestic smelters stepped up exports and reduced domestic spot supplies. SMM data showed that copper stocks in Shanghai-bonded areas rose by some 19,600 mt in the fortnight ended November 30, and stood at 408,600 mt.

This, and as traders favoured high-quality materials when delivering long-term orders by the end of the year, pushed the premiums for high-quality copper to 400 yuan/mt as of Thursday, over the SHFE December contract, up from 110 yuan/mt in late November.

Importers and downstream consumers preferred cheaper lower-quality copper, and this supported the supplies of hydro-copper across the spot markets.

Discounts for hydro-copper were heard up to 120 yuan/mt against the SHFE December contract earlier this week as some sellers sharply lowered their offers in a bid to cash in their cargoes.

Weak purchasing enthusiasm among downstream consumers also weighed on hydro-copper discounts, reflecting sluggish consumption across end-users.