Premium: Consumption recovery boosts spot premiums
China's refined copper spot premiums rose considerably last week. After the futures delivery, downstream purchasing interest recovered, combined with lower copper prices last week, leading refined copper trading volumes to rebound. Supported by improving consumption, spot premiums increased. Although the outflow of delivery warrants supplemented spot supply, market arrivals remained relatively tight, with limited shipments from domestic smelters and limited imported copper, which continued to support spot premiums.
Looking ahead, spot refined copper arrivals are expected to remain relatively limited in the near term, so spot premiums have underlying support and room to rise. However, as month-end approaches and copper prices remain high, downstream raw material purchasing interest is likely to be limited, which will cap the upside for spot premiums.
According to Mysteel, refined copper spot premium ranges are forecast with Shanghai at Yuan 200/tonne to Yuan 300/tonne, Guangdong at Yuan 100/tonne to Yuan 200/tonne, Tianjin at Yuan 50/tonne to Yuan 200/tonne, and Chongqing at Yuan 50/tonne to Yuan 260/tonne this week.
Data Source: Mysteel
Supply: China's refined copper spot supply shows limited improvement
China's refined copper spot supply saw only limited improvement last week. With the completion of futures deliveries, some warehouse receipts were released, increasing spot supply. However, domestic smelter shipments and imported copper arrivals remained low, leaving overall spot supply relatively tight. By region, in Shanghai and Guangdong, more smelter output was scheduled for export, sharply reducing local warehouse arrivals. In Tianjin, shipments from smelters that had previously undergone maintenance gradually resumed, but maintenance at other smelters limited the room for additional arrivals. In Chongqing, smelter shipments were also low, combined with increased long-term contract shipments, leading to tight spot availability. Looking ahead, although the impact of maintenance on smelter production is expected to ease, worsening raw material issues and the opening of the export window are likely to keep smelter shipments to China's domestic market relatively limited. In addition, import trade is loss-making, so imported copper is expected to provide only limited replenishment to spot availability. Overall, China's refined copper spot supply is expected to remain relatively tight in the near term.
Demand: Refined copper spot trading up WoW
China's spot refined copper trading volumes rose considerably last week. As futures deliveries concluded, spot supply increased slightly. Combined with lower copper prices, downstream raw material purchasing interest improved. However, copper prices remaining at relatively high levels and limited incremental orders from end-users during the off-season continued to weigh on 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 August 17-21 increased by 40.08% or 30,900 tonnes compared with the previous week, reaching 108,100 tonnes.
Looking ahead, spot premiums are expected to remain at high levels, copper prices are likely to remain elevated, and end-user consumption is unlikely to improve significantly in the near term. As a result, spot trading volumes in China's refined copper market are not expected to increase substantially.
Import: China's refined copper import losses narrow slightly
Driven by fluctuations in domestic and overseas copper prices, China's refined copper import ratio edged up slightly, but import trade remained at a substantial loss. As a result, market sentiment stayed cautious and actual transactions remained thin. Meanwhile, although the weekly average warehouse receipt and bill of lading premiums for refined copper at Shanghai Yangshan Port continued to decline early last week, they began to rebound later. Fewer arriving vessels made offers relatively firm, further dampening buyers' willingness to take cargoes.
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 and bonded inventories both rise WoW
China's refined copper retail inventory rose first and then fell last week. At the start of last week, the delivery of the 2608 contract took place, and spot prices were at a deep discount before delivery, so holders' willingness to deliver to warehouses increased significantly, lifting registered warehouse receipts. Meanwhile, high copper prices early in the week limited downstream purchasing demand, leading to relatively low warehouse outflows. As a result, China's refined copper retail inventory increased early last week. However, as market arrivals declined and copper prices retreated from highs subsequently, downstream consumption improved, and China's refined copper retail inventory dropped later last week. For this week, with month-end approaching and copper prices expected to remain high, room for consumption improvement is likely limited. However, given that refined copper arrivals are also expected to be low, China's refined copper retail inventory is likely to see only limited change or may fall slightly.
Last week, China's refined copper bonded inventory rose week on week. 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 inventory. However, the increase was limited as some cargoes were also exported overseas. Looking ahead, smelters' exported cargoes are expected to continue arriving at bonded zones, and customs clearances of bonded refined copper into the domestic market are likely to remain low as the import ratio may weaken 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 up by $2.88/tonne week on week to $522.50/tonne last week. The average LME cash-3M copper contract settlement spread was $267.1/tonne last week, up by $40.2/tonne week on week. As COMEX copper traded still at a premium, COMEX copper inventory kept increasing last week. Meanwhile, extreme backwardation at the LME attracted traders holding physical copper to deliver to warehouses for profits, leading LME copper inventory to also rise last week. Looking ahead, as the U.S. refined copper tariff policy remains uncertain, COMEX refined copper premiums are expected to persist in the near term.
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
