SHFE spot copper entered the 2409 contract with direct spot premiums? What drove this? [SMM Analysis]

Last Thursday, the last trading day of the SHFE copper 2408 contract, spot traders mainly quoted based on the SHFE copper 2409 contract. As buying sentiment for the SHFE copper 2408 contract increased, the price spread between the 2408 and 2409 contracts frequently fluctuated between backwardation and contango structures. Holders quoted spot premiums based on the SHFE copper 2409 contract, and after officially entering the SHFE copper 2409 contract trading on Friday, spot premiums persisted.

Recently, with the decline in copper prices and the impact of the Fair Competition Review Regulations on the secondary copper industry, copper cathode rods have seen an increase in orders not only from existing customer systems but also from the copper scrap substitution sector.

The weekly operating rate of copper cathode rods and wires and cables increased MoM. With the reduction in supply from smelters in Jiangsu, the sentiment for picking up goods from Shanghai warehouses in the Jiangsu, Zhejiang, and Shanghai regions increased, leading to continuous inventory reduction in Shanghai, which to some extent boosted the sentiment of holders to maintain prices.

It is worth noting that although copper prices have fallen, the SHFE inventory reduction and LME inventory buildup have caused SHFE copper and LME copper to show different downward trends. The SHFE spot copper import window gradually opened up, prompting importers to move bonded warehouse supplies to domestic sales. With the expectation of higher spot premiums in the future, more imports are likely to be attracted, which will suppress the domestic spot premium space.

In summary, with the expectation of reduced production from smelters and increased demand for copper cathode, holders are optimistic about future spot premiums. After mid-August, spot premiums are expected to persist, and the contango structure in futures is also expected to narrow.