October Yangshan Copper Premiums Collapse: What Lies Ahead? [SMM Analysis]

In October, copper prices remained stable with relatively small fluctuations. However, Yangshan copper premiums continued to decline, and the imported copper market in the Shanghai bonded zone performed poorly. What are the specific reasons for this, and what can we expect in the future?

Due to the long National Day holiday at the beginning of October, there were fewer trading days. Additionally, some shipments that were supposed to arrive at the end of September were delayed until early October, leading to a significant accumulation of arrivals after the holiday. This caused a sudden increase in the pressure on traders to sell. In the following two weeks, traders were busy attending various annual meetings, resulting in low enthusiasm for market quotations and inquiries, and actual trading volume continued to decrease. By the end of October, traders had accumulated a large amount of arrivals, causing Yangshan copper premiums to collapse. According to SMM, the total volume of copper cathode arrivals in October still increased MoM from September, and copper cathode from LME Asian warehouses continued to be transported back to China. Meanwhile, domestic demand for copper cathode in October was weak, and social inventory remained at a high level, creating a market where supply far exceeded demand in the foreign trade sector.

Looking ahead to November, SMM understands that import subsidies at some ports have already been exhausted, and the main driving force for downstream purchases in the current imported copper market in the Shanghai bonded zone comes from the profitable import space. Due to macro sentiment influenced by events such as the US elections, copper prices remain high, which suppresses consumption to some extent. At the beginning of November, the SHFE/LME price ratio fluctuated significantly, and the import window was open for only a short time. Therefore, overall, Yangshan copper premiums are expected to face resistance in November, with insufficient momentum for a rebound.