Premium: Sluggish market trading weighs on spot premium
Refined copper prices in China remained at relatively high levels last week, which dampened downstream enterprises' appetite for raw material procurement. Meanwhile, as the futures delivery date approached, downstream buyers became more cautious, further weakening consumption. Under these circumstances, holders had to lower their offers to secure deals. As a result, spot premiums for refined copper in China fell sharply last week.
Looking ahead to this week, although spot trading volumes are unlikely to improve significantly, China's refined copper spot premiums are expected to rise amid limited spot arrivals and a backwardation futures curve.
According to Mysteel, refined copper spot premium ranges are forecast with Shanghai at Yuan 0/tonne to Yuan 300/tonne, Guangdong at -Yuan 100/tonne to Yuan 300/tonne, Tianjin at -Yuan 400/tonne to Yuan 100/tonne, and Chongqing at Yuan 0/tonne to Yuan 300/tonne this week.
Data Source: Mysteel
Supply: Refined copper spot supply tight amid fewer smelter deliveries and lower imports
Spot supply of refined copper in China was tight last week. Smelters continued to send limited volumes to the spot market, while some increased planned exports, further reducing domestic spot availability. Typhoon disruptions in some regions also suspended port operations and prevented vessels from berthing and unloading, and some warehouses halted inbound and outbound movements, so imported copper arrivals added little to spot supply. In addition, the import trade has been loss-making recently, meaning customs clearances of imported copper have remained limited even after weather conditions improved. Overall, spot supply was tight last week. Looking ahead, smelter output and shipments are expected to remain low amid tight raw material supply, and refined copper exports will increase as the export window opens. Meanwhile, imported copper arrivals are likely to decline as the import ratio remains weak. In summary, arrivals into China's refined copper market are unlikely to improve significantly in the near term.
Demand: Growing downstream caution curbs spot trading volume
Spot trading volumes in China's refined copper market declined last week. Copper prices remained in a relatively high range, with the price center even edging higher, which slowed downstream consumption. Meanwhile, typhoon weather in some markets made warehouse deliveries difficult, further slowing downstream trading. In addition, as the futures delivery date approached, some downstream buyers became more cautious, slowing raw material purchases. Moreover, end-user consumption remained in the off-season with no signs of recovery yet, so limited new orders from end-users kept downstream procurement for raw materials relatively subdued.
According to Mysteel's survey of 56 Chinese refined copper trading enterprises (including smelters, traders, and downstream processors), the weekly transaction volume during August 10-14 decreased by 12.88% or 11,400 tonnes compared with the previous week, reaching 77,200 tonnes.
Looking ahead, spot premiums are expected to rise after futures delivery, copper prices are likely to remain elevated in the near term, and end-user consumption is unlikely to improve significantly. As a result, spot trading volumes in China's refined copper market are not expected to increase substantially.
Import: Shrinking profits and typhoon disruptions 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. Despite typhoon weather limiting vessel arrivals at Shanghai Yangshan Port, premiums for refined copper warehouse receipts and bills of lading at the port both declined week on week last week, due to slower trading in China's refined copper foreign trade market.
Looking ahead, China's refined copper import trade is expected to slow in the near term, weighed down by a weakening import arbitrage.
Inventory: China's refined copper retail inventory declines but bonded inventory rises
China's refined copper retail inventory fell first and then rose last week, edging down slightly week on week. Early in the week, typhoon disruptions and import ratio losses limited inflows of imported copper into the domestic market, causing inventory to decline. Later, as futures delivery approached and SHFE nearby contracts remained in a backwardation structure, cargo holders became more willing to deliver to warehouses while downstream buying interest slowed, pushing inventory higher. Looking ahead, some domestic smelters plan to increase refined copper exports, and production is unlikely to improve significantly due to tight raw material supply, so domestic refined copper arrivals are expected to remain low. Meanwhile, imported copper is also likely to be limited amid unfavorable import ratios. As a result, supply-side support for inventory is expected to remain limited. On the demand side, downstream consumption is unlikely to expand significantly in the near term, likely limiting the decline in refined copper inventory. Overall, with both supply and demand subdued, China's refined copper retail inventory is likely to see only modest changes in the near term.
China's refined copper bonded inventory rose first and then fell last week, edging up slightly week on week overall. During the week, refined copper cargoes scheduled for export by smelters gradually arrived, while fewer cargoes were cleared through customs into the domestic market amid import ratio losses, leading to a modest increase in bonded-zone inventory. However, the increase was limited as some bonded-zone cargoes were also exported overseas. Looking ahead, smelter-exported cargoes are expected to continue arriving at bonded zones, and customs clearances of bonded-zone material into the domestic market are likely to remain low as the import ratio weakens further. As a result, China's refined copper bonded inventory is expected to increase further in the near term.
The weekly average spread between the main COMEX and LME copper contracts was down by $53.53/tonne week on week to $519.62/tonne last week. The average LME cash-3M copper contract settlement spread was $226.9/tonne last week, up by $97/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.
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
