Yangshan copper premiums with a quotation period in April stood at $20-38/mt under warrants during April 10-14, with the average down $2.48/mt from a week earlier. Those stood between $30-48/mt under bill of lading with a quotation period in May, with the average flat from a week earlier. As of April 14, the SHFE/LME copper price ratio stood at 7.71, and import losses stood at 657 yuan/mt.
The export window opened slightly last Friday, but it was short-lived. The demand for warrants remained sluggish. The quotes in the domestic spot market did not improve due to the swinging price spread between the SHFE front-month and next-month contracts as well as the weakening downstream consumption. Yangshan copper premiums for warrants dropped last week. In terms of bill of lading, sellers lowered their quotes due to expanding import losses and market expectations for increasing supply in late April.
The current LME copper inventory has dropped to a low level of some 52,000 mt, and the backwardation of LME cash to the three-month contract expanded. In China, higher copper prices dampened downstream consumption, and the price spread between the SHFE front-month and next-month contracts weakened. The destocking pace has slowed down. In the short term, there is little room for the SHFE/LME copper price ratio to improve. There would be selloffs for cargoes slated to arrive soon, and Yangshan copper premiums should fall further.
As of April 14, copper inventories in the domestic bonded zones decreased 7,300 mt from April 7 to 155,800 mt, according to the latest SMM survey. Inventory in the Guangdong bonded zone added 1,300 mt to 13,200 mt, and inventory in the Shanghai bonded zone dropped 6,000 mt to 142,600 mt.
During the week, the decline in bonded zone inventories slowed down due to import losses, decreased shipments under warrants against low premiums in the domestic spot market and limited customs clearance. Some domestic brands of copper under warrants in LME warehouses have been cancelled recently, and will gradually flow into China.
Given the persistent import losses, the decline in copper inventories in China’s bonded zones is expected to slow down further.
