Improved import Losses Kept Yangshan Copper Premiums Firm

As of last Friday, Yangshan copper premiums with a quotation period in May stood at $17-32/mt under warrants during May 8-12, with the average up $2/mt from a week earlier. Those stood between $40-55/mt under bill of lading with a quotation period in June, with the average up $7/mt. As of May 12, the SHFE/LME copper price ratio stood at 7.88, and import profit stood at 118/mt.

The SHFE/LME copper price ratio fell before rising last week, and Yangshan copper premiums inched higher. Trading picked up. Import profit against the SHFE May copper contract occurred last week, boosting import demand. Quotes were firm under bill of lading. In terms of warrants, the wider contango structure of LME cash to the three-month copper contract combined with narrower import losses boosted demand. But actual trades were sluggish as most buyers were unwilling to bear excessive capital costs.

Domestic social inventories have continued to fall, and raw material inventories at downstream companies are low. In this scenario, the plunge in copper prices drove aggressive stockpiling after Labour Day holidays. However, most of the seaborne copper under bill of lading, slated to arrive in May, has been purchased. Some traders began to hold onto their cargoes at the end of last week. Yangshan copper premiums are expected to rise. As of Friday May 12, copper inventories in the domestic bonded zones decreased 9,300 mt from May 5 to 150,000 mt, according to the latest SMM survey. Inventories in the Guangdong bonded zone added 1,000 mt to 17,000 mt, while inventories in the Shanghai bonded zone dropped 10,300 mt to 133,000 mt. Recently, the import losses shrank and turned into profits, incentivising sellers to sell cargoes. Shipments under warrants thus increased. Arriving shipments under bill of lading grew last week but mostly went directly to downstream companies, limiting shipments arrivals in the bonded zones. This week, arriving shipments under bill of lading will fall. Bonded zone inventories are expected to drop further given narrower import losses.

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