Selloffs to Weigh on Yangshan Copper Premiums

SHANGHAI, Apr 24 (SMM) – Yangshan copper premiums with a quotation period in May stood at $18-28/mt under warrants during April 17-21, with the average down $2.8/mt from a week earlier. Those stood between $30-50/mt under bill of lading with a quotation period in May, with the average down $3.7/mt. As of April 21, the SHFE/LME copper price ratio stood at 7.78, and import losses were 262 yuan/mt.

Spot quotes in the domestic spot market dropped after the delivery of front-month contract early last week. This, combined with the long closed import window, weakened the demand for imported copper and caused sellers to face cash flow issues. As such, Yangshan copper premiums will fall further. In terms of bills of lading, sellers lowered their quotes due to concerns about high warehousing cost, dragging down Yangshan copper premiums.

This week, offers for cargoes slated to arrive in May will increase. Since domestic copper consumption is too moderate, the market is not optimistic over the premiums in May. It is expected that Yangshan copper premiums for bill of lading will gradually fall.

As of April 21, copper inventories in the domestic bonded zones dipped 100 mt from April 14 and stood at 155,700 mt, according to the latest SMM survey. Inventory in the Guangdong bonded zone added 1,900 mt to 15,100 mt, while inventory in the Shanghai bonded zone dropped 2,000 mt to 140,600 mt. The SHFE/LME copper price ratio improved during the week but the overall import profit was poor. Shipments from bonded zone inventories remained low as large sellers were liquidating inventories. In this scenario, the decline in bonded zone inventories slowed down further as expected.

Copper inventories in the bonded zone should grow slightly this week. From last weekend to this week, arriving shipments under bill of lading will increase, while some cargoes will go to Zhejiang attracted by local import subsidy policy. This will limit the stock accumulation in the Shanghai bonded zone.