Premium: Shrinking inventory supports spot premiums
Refined copper in China saw a rising price center last week. Though the resulting decline in trading volumes weighed on spot premiums, the tightening of overall spot supply prompted cargo holders to hold offers firm, so spot premiums in most Chinese markets rose week on week. Persistently low shipments from domestic smelters, together with limited arrivals and customs clearance of imported copper, kept refined copper inventory in China on a downward trend. In addition, the futures delivery date last week and the backwardation in SHFE copper contracts also gave a significant boost to spot premiums after delivery.
Looking ahead, China's domestic refined copper arrivals are unlikely to improve much in the short term, which will provide support for spot premiums, but the sustained opening of the import arbitrage window may increase imports and slightly ease the tightness in spot supply. Meanwhile, the off-season for end-user consumption means buying interest weakens at high prices, capping the upside for spot premiums. Overall, amid mixed bullish and bearish factors, spot premiums for refined copper are expected to fluctuate range-bound in the short term, with further upside room if copper prices fall.
Data Source: Mysteel
Supply: China's refined copper spot supply stays tight on limited smelter shipments
Refined copper spot supply in China was generally tight last week. In most markets, smelter shipments remained low, and although the import ratio was favorable, limited vessel arrivals kept inflows of imported copper into the domestic market relatively restrained. Meanwhile, in South China, transportation disruptions caused by natural disasters in Guangxi led to a marked decline in spot arrivals. In North China, tight upstream raw material supply further constrained smelter production and spot availability. Overall, China's refined copper spot supply stayed fairly tight.
Looking ahead, with the import arbitrage window remaining open, arrivals of imported copper are expected to increase. However, as domestic smelter shipments of refined copper are unlikely to improve much in the short term, China's refined copper spot supply is expected to remain tight.
Demand: Rising copper prices dampen spot trade volumes
Refined copper spot trading in China declined last week. The upward shift in copper prices during the week made downstream buyers more cautious. Although consumption resilience remained, with buying interest picking up at low prices, overall spot trading volumes fell week on week. At the same time, the delivery of the July contract and the widening backwardation in near-month futures contracts also slowed the procurement pace of downstream enterprises. In addition, as the market was still in the consumption off-season, limited growth in end-user orders made enterprises adopt a more cautious purchasing strategy when prices were relatively high.
Looking ahead, copper prices will strongly influence spot trading volume in the short term, but consumption resilience will persist and downstream buying interest will emerge at low prices. As a result, spot refined copper trading volumes in China are expected to hold at a certain level and unlikely to decline sharply in the near term, barring a stronger-than-expected rise in copper prices.
Inventory: China's refined copper retail inventory keeps falling but bonded inventory increases
China's refined copper retail inventory fell further last week. On one hand, low domestic material arrivals and limited inflows of imported copper clearing customs kept inventory inflows relatively light. On the other hand, downstream procurement stayed fairly firm, with buying on price dips keeping outflows decent. As a result, China's refined copper retail inventory continued to decline. Looking ahead, with the import window open, inflows of imported material are expected to increase, but shipments from domestic smelters will remain limited. At the same time, given relatively firm copper prices, downstream consumption may struggle to see a significant pickup. Therefore, while China's refined copper retail inventory is expected to keep decreasing this week, the pace of decline is likely to narrow.
China's refined copper bonded inventory rose week on week last week. Although some warehouse receipt cargoes cleared customs and entered China's domestic market during the week, export cargoes scheduled by smelters and arriving shipments gradually flowed into bonded warehouses, resulting in relatively heavy overall inflows and pushing inventory higher. Looking at this week, with the import ratio remaining reasonable, some bonded material is expected to be imported into the domestic market, while some bonded material also has plans for export overseas. As a result, China's refined copper bonded inventory is expected to decline again.
The weekly average spread between the main COMEX and LME copper contracts was up by $30.52/tonne week on week to $396.08/tonne last week. The average LME cash-3M copper contract settlement spread was -$44.8/tonne last week, up by $13.3/tonne week on week. As COMEX copper traded still at a premium, COMEX copper inventory kept increasing last week and LME copper inventory fell further. Looking ahead, as the U.S. refined copper tariff policy remains uncertain, COMEX refined copper premiums are expected to persist in the near term, sustaining the trend of rising COMEX inventory and falling LME inventory. Additionally, the persistent contango between LME cash and three-month copper contracts is likely to continue dampening the willingness to deliver into LME warehouses.
Data Source: Mysteel
More regular analysis and comprehensive data on China's copper industry are available in Mysteel Copper Weekly, Mysteel Copper Monthly, and Mysteel Copper Database. Reach out to us via Mysteel's official website: Latest & Reliable Copper Market Price in China | Mysteel, and follow Mysteel Non-Ferrous for more insights!
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Written by Zhaorui Cui, cuizhaorui@mysteel.com
Edited by Mingyuan Wang, wangmingyuan@mysteel.com
