Premium: Sluggish consumption drags down refined copper spot premiums
China's refined copper prices rose last week as macro headwinds eased. This fuelled strong wait-and-see sentiment among downstream buyers and weakened purchasing appetite, forcing holders to lower their offers and spot premiums to secure sales. At the same time, although domestic refined copper arrivals remained limited, imported copper continued to flow into the Chinese market, keeping retail inventory on a slight uptrend and adding downward pressure on spot premiums. As a result, spot premiums for refined copper in China fell sharply last week.
Looking ahead, the approaching contract expiry and rollover, together with the backwardation in SHFE copper contracts, may lend some support to spot premiums. However, if copper prices stay elevated, downstream demand is expected to remain sluggish and drag premiums lower. On balance, China's refined copper spot premiums are likely to stay range-bound in the near term.
According to Mysteel, refined copper spot premium ranges are forecast with Shanghai at Yuan 0/tonne to Yuan 150/tonne, Guangdong at Yuan 0/tonne to Yuan 100/tonne, Tianjin at -Yuan 150/tonne to -Yuan 50/tonne, and Chongqing at -Yuan 100/tonne to Yuan 200/tonne this week.
Data Source: Mysteel
Supply: Spot supply to remain tight amid limited smelter shipments and deteriorating import ratio
China's refined copper spot supply remained tight last week. Arrivals from smelters in Shanghai and Guangdong stayed low, with the Shanghai market mainly supplemented by customs-cleared inflows of imported copper. Meanwhile, some smelters in Tianjin were still under maintenance. Although a few that had been shut earlier resumed supply, the overall improvement in spot availability was limited. In contrast, Chongqing saw concentrated arrivals of smelter cargoes, which slightly eased local spot tightness. Overall, spot circulation in China's refined copper market remained relatively weak last week. Looking ahead, China's refined copper spot supply is expected to tighten further. On one hand, domestic smelter shipments are unlikely to increase significantly in the near term, and potential export plans may emerge as the export arbitrage window open. On the other hand, imported copper is likely to decline, weighed down by a worsening import ratio, slow port discharge efficiency and typhoon disruptions. In summary, China's refined copper spot supply is expected to stay tight in the near term.
Demand: Rising copper prices cap spot trading volumes
Spot trading volumes in China's refined copper market remained low last week, weighed down by rising copper prices and persistently weak end-user demand. By market, as copper prices continued to climb, downstream buyers in Shanghai showed strong resistance to high prices, largely staying cautious with subdued purchasing appetite. In Guangdong, downstream buyers also slowed raw material procurement amid elevated copper prices and thin new orders, only closing small deals during brief price pullbacks. Spot trading volumes in Tianjin and Chongqing were similarly limited, with enterprises merely covering their immediate needs.
According to Mysteel's survey of 56 Chinese refined copper trading enterprises (including smelters, traders, and downstream processors), the weekly transaction volume during August 3-7 increased by 4.44% or 3,770 tonnes compared with the previous week, reaching 88,598 tonnes.
Looking ahead, with limited growth in end-use orders, price movements will heavily influence spot consumption. In the near term, if copper prices see a temporary correction, spot trading volumes could pick up modestly. However, if prices remain elevated, spot transactions are unlikely to improve materially.
Import: Shrinking profits slow China's refined copper imports
Driven by fluctuations in domestic and overseas copper prices, China's imported copper price ratio edged down week on week, and the import profit margin also decreased last week. As losses on imported refined copper trades widened, traders turned increasingly cautious, and with buying interest remaining weak, activity in China's refined copper foreign trade market was subdued last week. Meanwhile, though cargo vessels continued to arrive at Shanghai Yangshan Port, port congestion slowed loading and unloading. With imports still arriving while demand softened, premiums for both warehouse receipts and bills of lading at Yangshan Port declined.
Looking ahead, China's refined copper import trade is expected to slow in the near term, weighed down by a weakening import arbitrage and typhoon disruptions.
Inventory: China's refined copper retail inventory rises but bonded inventory decrease
China's refined copper retail inventory edged up slightly last week. Traders who had locked in earlier favourable import arbitrage opportunities continued to clear customs and bring cargoes into the domestic market, while spot consumption stayed low as copper prices climbed further, pushing inventory higher. However, the increase was relatively limited given low arrivals of domestically produced material. Looking ahead, inflows of imported copper are expected to slow due to congestion at Yangshan port. Meanwhile, as the import arbitrage deteriorates and import losses widen, China's refined copper imports may remain uncertain. In addition, domestic smelters' shipments may remain low, and some may even have export schedules as the export arbitrage widens. In summary, near-term inbound volumes to China's refined copper retail inventory is unlikely to pick up noticeably. Meanwhile, elevated copper prices are likely to temper downstream consumption. Amid weak supply-demand dynamics, retail inventory is expected to maintain a mild accumulation trend.
China's refined copper bonded inventory declined further 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. Meanwhile, due to the premium on overseas refined copper, some cargoes were exported. Looking ahead to this week, as the export window for China's refined copper gradually opens, domestic smelters are planning to export and are expected to gradually ship material into bonded zones, pointing to a near-term rebound in China's refined copper bonded inventory.
The weekly average spread between the main COMEX and LME copper contracts was up by $178.99/tonne week on week to $573.15/tonne last week. The average LME cash-3M copper contract settlement spread was $129.9/tonne last week, up by $97.8/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 remain positive, 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
