After the holiday, the imported copper market in the Shanghai bonded zone remains sluggish. What are the reasons? [SMM Analysis]

After the National Day holiday, Yangshan copper premiums continued to decline, and the imported copper market in the Shanghai bonded zone performed poorly. Holders kept lowering prices to test the market, but transactions did not show significant improvement. What are the reasons?

According to SMM, due to the impact of typhoons and other factors at the end of September, a large amount of copper cathode arrived during the National Day holiday in early October, with concentrated arrivals. Most of these were sold by holders before the holiday, and after the holiday, market quotations were mainly for cargoes with ETA in mid-to-late October. From the perspective of bonded zone inventory, it did not increase after the National Day holiday and showed a continuous decline. This suggests that most of the cargoes arriving in early October were directly imported and did not stay or enter the bonded warehouse.

After the National Day holiday, domestic copper cathode inventories continued to increase. As of October 14, SMM's copper cathode inventory in major regions nationwide reached 220,500 mt, up 35,000 mt from September 30 before the holiday. According to SMM, this is mainly due to the concentration of domestic and imported copper into warehouses, coupled with average downstream consumption demand. Currently, the price center of the most-traded SHFE copper contract remains above 76,500 yuan/mt, making it difficult for processing enterprises to secure new orders, resulting in low purchase willingness. Therefore, after the holiday, spot premiums/discounts for copper cathode in Shanghai continued to be under pressure and declined.

The sluggish condition of the imported copper market in the Shanghai bonded zone has persisted into the second week (this week) after the holiday. Some traders were forced to sell at low prices in the first week after the holiday, dumping recently arrived cargoes. However, the market continued to deteriorate this week, even showing a situation where there were prices but no market. Some traders' sentiment of fearing a price drop intensified, further reducing their purchase willingness. Due to SMM hosting the Nonferrous Metals Annual Conference in Qinghai this week, many traders attended the conference, resulting in fewer market quotations and inquiries, which had a certain impact on the market. From the SHFE/LME price ratio perspective, the import profit and loss for the front-month contract remained negative, and in the current context of few financial arbitrage opportunities, purchase willingness was low, making the imported copper market even more sluggish.

Looking ahead, domestic copper cathode inventory digestion still requires time, and there will be more copper cathode arrivals in late October, putting pressure on the upper end of Yangshan copper premiums. Some traders indicated that the current poor downstream demand is mainly due to the lack of purchasing motivation from processing enterprises, with a heavy market sentiment of waiting for copper prices to fall. If copper prices drop, it will benefit consumption improvement and the SHFE/LME price ratio recovery; otherwise, it will further hit the market.