Premium: Copper arrival disparities drive spot premium divergence across markets
China's refined copper spot premiums diverged across markets last week. Premiums in Shanghai rose, while those in Guangdong fell, and other markets saw limited changes. The increase in Shanghai was mainly driven by reduced arrivals of imported copper and limited deliveries from smelters during the week. Meanwhile, the contango on the nearby contract also prompted some holders to withhold supply to support premiums. In contrast, the decline in Guangdong was due to increased spot availability caused by inflows of refined copper from other regions.
Looking ahead, China's refined copper spot premiums are expected to remain firm in the near term. The approaching delivery of the June contract, coupled with limited arrivals, is likely to encourage holders to hold back sales, supporting spot premiums. According to Mysteel, refined copper spot premium ranges are forecast with Shanghai at -Yuan 80/tonne to Yuan 30/tonne, Guangdong at -Yuan 50/tonne to Yuan 50/tonne, Tianjin at -Yuan 260/tonne to -Yuan 160/tonne, and Chongqing at Yuan 0/tonne to Yuan 200/tonne this week.
Data Source: Mysteel
Supply: China's refined copper spot supply diverges across markets
China's refined copper spot supply diverged across markets last week. Smelter deliveries to Shanghai, Guangdong, and Chongqing remained limited, with some markets seeing further reductions. In Shanghai, arrivals of imported copper declined as the import ratio weakened, tightening spot supply further. In Guangdong, despite lower smelter deliveries, higher local spot premiums attracted increased inflows from other regions, leaving spot supply relatively ample during the week. In Tianjin, smelters were active in production and shipments, resulting in loose spot supply, while some refined copper was even redirected to southern markets where premiums were higher. Looking ahead, the current supply divergence is unlikely to persist in the near term. As the inflow-driven increase in Guangdong supply narrows its premium over other markets, the inbound shipments are expected to diminish. Overall, with smelter deliveries remaining limited, spot supply is expected to stay tight across most Chinese markets.
Demand: Downstream procurement fluctuates amid volatile copper prices
China's refined copper spot trading edged up slightly week on week last week. Earlier in the week, when prices were elevated, downstream buying appetite was strongly restrained. Combined with limited end-use order growth, demand for refined copper remained weak. In the second half of the week, as prices retreated, buying interest picked up and demand gradually emerged. However, with prices still relatively high and end-user order growth limited, the rebound in overall trading volumes was modest. Looking ahead, spot trading volumes are unlikely to improve significantly in the near term, weighed down by persistently high copper prices and the seasonal demand lull in the end-user market.
Inventory: China refined copper retail inventory declines but bonded inventory rises last week
China's refined copper retail inventory edged up before declining last week. Specifically, retail inventory in Shanghai continued to decrease. Although copper price volatility and persistently elevated levels kept outflows from warehouses moderate, the weakening import ratio reduced customs-cleared inflows of imported copper, while domestic arrivals also remained limited, resulting in even smaller warehouse inflows and an overall destocking in Shanghai. In Guangdong, inventory rose and then fell. Inflows from other regions pushed inventory higher early in the week, but as copper prices and spot premiums retreated in the second half, downstream consumption picked up and pulled inventory lower. Overall, limited market arrivals and a modest improvement in consumption led to a week-on-week drop in China's refined copper retail inventory. Looking ahead, arrivals of both imported and domestic copper are unlikely to increase significantly in the near term, and the retreat in copper prices is expected to boost downstream purchasing sentiment. China's refined copper retail inventory is therefore likely to maintain its downward trend.
China's refined copper bonded inventory rose week on week last week. Weak import ratio and sluggish downstream demand kept customs clearance volumes from bonded zones limited, pushing inventory higher. Looking ahead, China's refined copper import ratio is expected to remain weak in the near term, continuing to restrict outflows from bonded zones. Additionally, export cargoes planned by some smelters are likely to gradually arrive at bonded zones. Consequently, China's refined copper bonded inventory is expected to keep rising in the short term.
Data Source: Mysteel
Written by Zhaorui Cui, cuizhaorui@mysteel.com
Edited by Mingyuan Wang, wangmingyuan@mysteel.com
