Spot Premiums In Guangdong Copper Market Surged Before Falling Last Week

Last week, spot premiums soared and then dropped back. Pre-holiday stockpiling combined with tight available cargoes drove spot premiums to rise on Monday and Tuesday last week. On Wednesday, the downstream buyers basically ended the pre-holiday stockpiling and a large volume of cargoes under warrants were offered for sale, causing spot premiums to drop rapidly. As of Wednesday June 21, the spot premiums for high-quality copper fell 110 yuan/mt from Friday June 16 to 260 yuan/mt, and the premiums for standard-quality copper stood at 250 yuan/mt, a drop of 100 yuan/mt.

Hydro-copper was quoted with premiums of 200 yuan/mt, a decline of 80 yuan/mt. Last Wednesday, the prices in Shanghai exceeded those in Guangdong by 170 yuan/mt. The price gap between the two regions widened to a maximum of 250 yuan/mt, leading to opportunity for cargo transfer between the two regions.

As of last Wednesday, total inventories in Guangdong stood at 28,500 mt, a decline of 3,600 mt from Friday June 16 due to a sharp drop in arriving shipments. There was a small volume of shipments arrivals of imported copper. Meanwhile, the high spot premiums in east China attracted inflows of cargoes. Some traders delivered cargoes from Guangdong warehouses to east China. In addition, many downstream processing enterprises in Guangdong closed for 2-3 days due to the Dragon Boat Festival holidays, and the stockpiling was less than the same period last year.

This week, total supply in Guangdong will grow in light of poor consumption, increased shipments arrivals during the holidays and arriving shipments of imported copper at the month-end. Downstream consumption is expected to continue to decline due to high copper prices and the mid-year settlement. As such, SMM sees a supply surplus this week and inventory will grow.