Spot Copper Trades in Major Chinese Markets

SHANGHAI, Mar 14 - In Shanghai, spot trades were brisk amid falling copper prices, reducing social inventories remarkably. Spot premiums thus edged higher. SMM reported that #1 copper cathode traded with discounts of 10 yuan/mt to premiums of 30 yuan/mt against SHFE 2303 copper contract on Friday March 3, and with premiums of 70-120 yuan/mt over the contract on Friday March 10. Tight supply of imported non-registered copper and hydro-copper prevented spot copper from being traded with discounts, narrowing its price spread with standard-quality copper further. Tight supply of high-quality copper buoyed its premiums to exceed yuan/mt at the end of the week. According to SMM statistics on Friday, 14,000 mt of cargoes were removed from warehouses in Shanghai during the week, reflecting further recovery of consumption. Import losses, albeit narrower, discouraged large influx of imported cargoes. This, coupled with active exports to bounded warehouses by some smelters, translated to inventory decline in Shanghai. The contango of SHFE March copper contract over the SHFE April copper contract shrank and turned into backwardation. This means that spot cargoes will be traded with premiums rather than discounts after the delivery of the March contract this week.

Spot quotes in Shandong continued to rise slightly last week. Some large smelters that had been selling aggressively raised their quotes from Monday to Wednesday, pushing up spot prices.  According to downstream processing enterprises, the current end-user demand is relatively resilient and sensitive to changes in copper prices. When copper prices rose, downstream purchases were more cautious. Spot quotes should have been stable as the overall consumption was still recovering slowly. Yet, market optimism boosted spot quotes in Shandong on Friday. This week, a combination of limited inventories at some smelters and improving downstream consumption will continue to raise spot quotes in Shandong.

Spot quotes in north China rose noticeably last week. Spot copper was quoted with discounts of 420-160 yuan/mt, or an average discount of 290 yuan/mt, on Friday March 3, and was quoted with discounts of 310-90 yuan/mt, or an average discount of 200 yuan/mt, on Friday March 10, up 90 yuan/mt. The purchase of copper cathode rods by downstream cable factories increased due to falling copper prices last week. Meanwhile, smelters shipped cargoes to east China where spot quotes were higher as the delivery nears, reducing the supply pressure in north China. Consequently, spot quotes in north China rose significantly.