Copper Inventory in Bonded Zone to Fall as Copper Import Returned to Profitability

Last week, due to the market panic caused by the liquidity risk of European and American banks, LME copper fell below $8,450/mt at one point, bolstering the SHFE/LME copper price ratio. This ultimately turned import losses into profits. During the week, the premiums of Yangshan copper rose significantly. In terms of warrants, market trading picked up, and sellers took the opportunity to raise the premiums. At the end of the week, as the domestic spot premiums fell, market transactions cooled slightly. In terms of bills of lading, the supply of goods has been relatively tight recently. After the price ratio improved, the trading sentiment of both parties increased. Sellers held onto their cargoes, and the bill of lading premiums jumped.

Traded import premiums for high-quality pyro-copper currently stand at around $55-60/mt under warrants, $50/mt for mainstream pyro-copper, and $40/mt for hydro-copper, with the quotation period in April. On the B/L front, premiums are $60-65/mt for high-quality copper, $55/mt for mainstream pyro-copper, and $45/mt for hydro-copper. The quotation period is in April.

Some imported copper sources will flow into the domestic trade market this week, which may suppress the domestic spot premiums. The trading activity of imported copper under warrants will further decline, limiting any upside space for Yangshan copper premiums. In the short term, the supply of bills of lading will still be insufficient, and the offers will rise slightly. The actual traded premiums cannot exceed $60/mt.

As of March 17, copper inventories in the domestic bonded zones increased 5,100 mt from March 10 to 200,600 mt, according to the latest SMM survey.

Inventories in the Guangdong bonded zone fell 1,200 mt to 15,000 mt due to a larger volume of shipments leaving the bonded zone. Those in the Shanghai bonded zone added 6,300 mt to 185,600 mt. Part of the increase in bonded zone inventory last week was contributed by the export by domestic smelters. The import losses narrowed sharply during the week and turned into profit at the end of the week. Some smelters planned to reduce exports in March. At the same time, some cargoes under warrants have flowed and will continue to flow into the domestic trading market amid improving SHFE/LME copper price ratio. Given limited shipments arrivals recently, bonded zone inventories look set to fall last week.