Year-end Long-term Contract Negotiations: Will the Cancellation of Copper Semis Export Tax Rebates Cause Fluctuations in the Imported Copper Market in the Shanghai Bonded Zone? [SMM Analysis]

Since the start of the Asia Copper Week by CESCO, the imported copper market in the Shanghai bonded zone has begun negotiations for 2025 long-term contracts. However, there are currently not many long-term contract quotes in the market. According to SMM, the main offers include the following:

Codelco's first-round offer to Chinese enterprises is $89/mt, priced at M+1 month, which is the same as the 2024 offer;

PPC's first-round offer to Chinese enterprises is $88/mt, priced at M+0 month, which is the same as the 2024 offer;

LS's first-round offer to Chinese enterprises is $70+, priced at the month of arrival.

Overall, there are currently not many long-term contract offers from overseas enterprises, and large traders have not yet started quoting, leaving the market in a tentative phase. Currently, overseas smelters' offers are the same as last year. Due to prolonged losses in 2024, domestic traders find it difficult to accept the current market offers for 2025 long-term contracts.

On November 15, the Ministry of Finance and the State Administration of Taxation issued Announcement No. 15 of 2024, stating the cancellation of export tax rebates for products including copper semis, which has garnered significant market attention. According to SMM, this policy will have a considerable impact on the Ordinary Trade of copper semis, making it difficult to enjoy tax rebates in the future. However, enterprises with export processing manuals will not be affected. Therefore, the market is concerned about whether this policy will lead to an increase in future foreign trade copper demand and whether traders will increase the proportion of long-term contracts.

According to an SMM survey, downstream processing enterprises indicated that this policy mainly affects Ordinary Trade, with minimal impact on large enterprises with processing manuals and overseas production sites. Previously, copper semis processing enterprises primarily engaged in Ordinary Trade are expected to shift to processing trade with supplied/imported materials, which offers relatively small profit margins and operational flexibility. Thus, it is expected to have limited impact on boosting foreign trade copper demand. Traders in the imported copper market in the Shanghai bonded zone stated that copper semis enterprises with processing manuals already account for a relatively small proportion of total exports, and the overall demand for foreign trade copper is not significant. The expected increase in foreign trade copper demand due to the shift from Ordinary Trade to processing manuals is limited, and traders are not likely to sign more long-term contracts because of this policy.

SMM will continue to monitor the signing of long-term contracts in the imported copper market in the Shanghai bonded zone and the impact of the cancellation of copper semis export tax rebates, providing ongoing analysis and reports.