Premium: Month-end trading slowdown weighs on refined copper spot premiums
Spot premiums for refined copper in China fell last week. On the one hand, although smelter deliveries remained limited, the volume of imported copper clearing customs and entering the Chinese market increased. On the other hand, amid firm copper prices, growing month-end funding pressures and tax invoice management, downstream procurement slowed. As a result, refined copper retail inventory in China rose on slightly improved supply and weak demand, which in turn capped spot premiums.
Looking ahead, arrivals of imported copper and its inflow into the domestic market are expected to persist in the near term, while elevated copper prices will likely constrain downstream demand growth. Spot premiums are therefore expected to continue declining in the short term.
According to Mysteel, refined copper spot premium ranges are forecast with Guangdong at Yuan 0/tonne to Yuan 100/tonne, Tianjin at Yuan 100/tonne to Yuan 200/tonne, and Chongqing at -Yuan 50/tonne to Yuan 350/tonne this week.
Data Source: Mysteel
Supply: Rising imported copper inflows slightly increase refined spot supply
Spot supply in China's refined copper market improved slightly last week. Although smelter deliveries remained limited, spot availability in Shanghai and Guangdong improved as bonded refined copper was actively cleared through customs into the domestic market. The gradual arrival of some previously delayed cargoes also helped ease the tight domestic supply. It is worth noting that as the Shanghai-Guangdong copper price spread narrowed, cross-regional inflows into the Guangdong market decreased. Meanwhile, spot supply in Tianjin and Chongqing remained tight, with smelter maintenance still disrupting shipment schedules. In Tianjin, some material flowed to other regions due to lower local refined copper premiums. Overall, spot supply improved in some markets last week, supported by the inflow of imported copper. Looking ahead, low smelter deliveries and supplementary imported copper inflows are expected to persist in the near term, making it difficult for overall refined copper spot supply in China to improve notably. However, as smelter maintenance gradually winds down, China's supply is likely to improve in August.
Demand: Approaching month-end and high copper prices slow spot trading
Spot trading volumes for refined copper in China fell week on week last week. On one hand, although the weekly average spot price declined week on week, it stayed at a relatively high level, combined with mounting month-end funding pressures, slowing spot purchases. On the other hand, limited downstream order growth meant that rigid demand did not pick up significantly, emerging only when prices hit relatively low levels during the week. In addition, some copper processors in certain markets entered routine maintenance, further suppressing overall spot refined copper trading.
According to Mysteel's survey of 56 Chinese refined copper trading enterprises (including smelters, traders, and downstream processors), the weekly transaction volume during July 27-31 decreased by 14.29% or 14,146 tonnes compared with the previous week, reaching 84,828 tonnes.
Looking ahead, while funding pressure is likely to ease entering August, copper prices are expected to remain elevated, which will continue to curb downstream buying appetite. Moreover, new downstream orders are also expected to be limited. Consequently, spot trading volumes in China's refined copper market are unlikely to see significant growth in the near term, unless a larger-than-expected drop in copper prices prompts downstream users to restock on dips.
Inventory: China's refined copper retail inventory rises but bonded inventory decrease
China's refined copper retail inventory rose week on week last week. On one hand, although the import arbitrage weakened last week, traders had previously locked in profits with substantial orders, leading to steady inflows of imported copper that supplemented domestic spot supply. On the other hand, the approaching month-end and elevated copper prices dampened downstream purchasing appetite, reducing warehouse outflows. With supply slightly improved and demand declining, refined copper retail inventory in China increased from the previous week. However, persistently low smelter deliveries kept the inventory build limited. Looking ahead, arrivals and inflows of imported copper into the domestic market are expected to remain stable in the near term, while elevated copper prices will likely cap any significant rise in downstream consumption. China's refined copper retail inventory is therefore expected to continue rising.
China's refined copper bonded inventory declined week on week last week. The main reason was that previously favorable import profit led to the gradual customs clearance and import of cargoes from some warehouses into the domestic market. Looking ahead to this week, some bonded warehouse cargoes still have plans for customs clearance and import into domestic market, so China's refined copper bonded inventory are expected to continue to decline.
The weekly average spread between the main COMEX and LME copper contracts was down by $17.01/tonne week on week to $394.16/tonne last week. The average LME cash-3M copper contract settlement spread was $32.1/tonne last week, up by $20.9/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. In addition, if the LME copper cash-to-three-month spread increases further, delivery appetite may be dampened and LME inventory suppressed.
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!
Written by Zhaorui Cui, cuizhaorui@mysteel.com
Edited by Mingyuan Wang, wangmingyuan@mysteel.com
