SHFE/LME Price Ratio Weakened During the Week, Market Trading Sentiment Remained Sluggish [SMM Yangshan Copper Weekly Review]

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This week (January 13-17), the weekly average price range of Yangshan copper premiums B/L transactions was $57.6-71.6/mt, QP February, with an average price of $64.6/mt, up $0.6/mt WoW. Warehouse warrants were $70.8-80.8/mt, with an average price of $75.8/mt, up $4/mt WoW, QP February. EQ copper CIF B/L ranged from $7.2/mt to $21.2/mt, with an average price of $14.2/mt, down $0.6/mt WoW, QP February. As of 15:00 on January 17, the SHFE/LME copper price ratio for the SHFE copper 2502 contract was 8.23, with an import loss of approximately -600 yuan/mt. For the SHFE copper 2503 contract, the SHFE/LME price ratio was 8.25, with an import loss of approximately -640 yuan/mt. As of Thursday, the LME 3M-Feb contango was C$62.87/mt, with the February-to-March date swap fee spread at C$35/mt.

Currently, the spot price for pyro high-quality copper warehouse warrants is $81/mt, mainstream pyro is $71/mt, and wet-process quotes are scarce. High-quality copper B/L is $70/mt, mainstream pyro is around $63/mt, and wet-process is $56/mt. CIF B/L EQ copper is $6-20/mt, with an average price of $13/mt.

This week, the import profit window closed, and previous exchange rate fluctuations were gradually smoothed out. However, the price spread between the COMEX most-traded contract and the LME 0-3M contract remained high. Since this spread is not caused by inventory factors, there is currently no significant cargo transfer on the Asia-North America route. With the Chinese New Year approaching, there were few transactions for cargo arriving in late January, and most inquiries focused on cargo arriving in early February. Due to the widening SHFE/LME price ratio, buyers and sellers had significant differences. This week, a large number of warehouse warrants were still canceled in LME Asian warehouses, but the 0-3M contango structure showed no significant fluctuations. Some previously canceled cargoes have already entered the country. Due to the continued low inventory in bonded zones, some downstream buyers also transferred goods from LME warehouses back to China to prepare for domestic inventory. For EQ copper, there were scattered offers for cargo arriving in mid-to-early February, but actual transactions were significantly affected by the deteriorating SHFE/LME price ratio. Looking ahead, as the countdown to the Chinese New Year holiday begins next week, most market traders are expected to become inactive. After the SHFE/LME price ratio window closes, market offers and transactions are likely to cool down, with downstream pre-holiday demand becoming the market's focus. Yangshan copper premiums are expected to shift downward overall, but fluctuations are expected to remain relatively small due to inventory factors.

According to the SMM survey, as of Thursday (January 16), domestic bonded zone copper inventories decreased by 2,100 mt WoW (from January 9) to 20,300 mt. Among them, Shanghai bonded inventories decreased by 3,700 mt WoW to 15,200 mt, while Guangdong bonded inventories increased by 1,600 mt WoW to 5,100 mt. This week, the decline in Shanghai bonded inventories was mainly driven by downstream rigid demand. In Guangdong, due to the previous rise in premiums, import profits drove some cargoes from LME Taiwan warehouses to Guangdong bonded zones, resulting in a slight inventory increase. As copper prices rose and the SHFE/LME price ratio weakened, coupled with downstream enterprises gradually taking holidays, bonded warehouse warrant demand is expected to slow down before the holiday. Bonded zone inventories are expected to increase next week.

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