Copper Import Premiums To Fall, Copper Inventory In China Major Markets To Grow With Slower Decline In Bonded Zone Inventory

As of last Friday, Yangshan copper premiums with a quotation period in June stood at $39.2-54.2/mt (for spot cargoes) under warrants during June 5-9, with the average up $3.6/mt from a week earlier. Those stood between $51.4-66.4/mt under bill of lading with a quotation period in July, with the average flat from the prior week.

As of June 9, the SHFE/LME copper price ratio stood at 8.08, and import losses stood at 208/mt. The SHFE/LME copper price ratio continued to fall but import premiums for cargoes slated to arrive in June were firm. Inquiries for cargoes scheduled to arrive in June and in the second half of July diverged. Semi-annual trade targets boosted some traders’ demand for bill of lading slated to arrive in June. Meanwhile, premiums in the domestic spot market exceeded 300 yuan/mt, prompting sellers to raise import premiums. On the other hand, buyers were more pessimistic over the SHFE/LME copper price ratio in July.

This week, arriving shipments of seaborne copper under bill of lading and shipments from China’s bonded zone inventories will fall in mid-June from early June. Copper inventories across China’s major markets will accumulate slightly amid weaker downstream consumption. Spot premiums will fall ahead of the delivery of the SHFE front-month copper contract. LME cancelled warrants increased rapidly recently and accounted for 55.38% as of June 9, most of which were concentrated in Asian warehouses. During the week, the contango structure of LME copper narrowed rapidly, and once turned into a small backwardation structure. As LME cancelled warrants enter China, Yangshan copper premiums will weaken.

As of Friday June 9, copper inventories in the domestic bonded zones decreased 13,800 mt from June 2 to 87,800 mt, according to the latest SMM survey. Inventories in the Guangdong bonded zone dipped 2,000 mt to 8,000 mt, and inventories in the Shanghai bonded zone fell 11,800 mt to 79,800 mt. Traders had locked in profits previously when import profits were high and imported copper from bonded zone inventories. But as the SHFE/LME copper price ratio weakened recently, shipments from bonded zone inventories have declined after the completion of delivery taking for the delivery of the SHFE 2306 copper contract. In addition, there will be arriving shipments under bill of lading in mid-June. As such, the declines in bonded zone inventories will slow down.

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