1．Outlook for the Future Copper Market after Resumption of Work in Shanghai

  In recent days, enterprises in Shanghai that can realise closed-loop management within their plants have embarked on the road of resumption of production. Difficulties of logistics and warehouses are eased to some extent. As a result, the manner of copper cathode in domestic and import markets is expected to improve, alleviating the shortage of copper cathode supply in processing enterprises in Jiangsu and Zhejiang. What’s more, the spread between Jiangsu and Zhejiang and Shanghai will gradually narrow. So what will the future copper market be like? This article will do a general analysis.

On the supply side, with the improvement of logistics, some smelters and warehouses in Shanghai have already resumed normal shipments. Imported goods piled up in the bonded area are declared one after another, and the domestic supply eases. Although logistics have improved, there are only a limited number of vehicles that can obtain passes. Therefore, transactions requiring personnel turnover are still low. In terms of imports, although the SHFE/LME price ratio is slightly repaired, the imports are still at losses, and the demand for import customs declaration is sluggish.
Under the expectation of warmed up consumption in China, LME inventory has not reached its peak, with the latest inventory approaching 130,000 mt. Accordingly, the registered warrants rose, and the cancelled warrants dropped from a high level. Social inventory across China and the inventory of SHFE warrants are low and will continue to decline. Therefore, in the future market, SHFE/LME price ratio will be improved.

On the demand side, the terminal industry cannot provide momentum to copper consumption. The domestic real estate market is sluggish, and the production and sales of home appliances are poor compared with the same period last year. After the pandemic gets eased, the State Grid and infrastructure may improve greatly. According to the SMM survey, the investment in power grid equipment of State Grid increased by 5% in 2022, especially the distributed photovoltaic bidding projects. Major local infrastructure investment projects increased by 12%. In March, many wire and cable companies indicated that orders from expressway and railway transportation increased slightly year-on-year. In April, the rising copper prices and pandemic led to changes in the economic level, which made it difficult for some State Grid and infrastructure projects to be implemented smoothly.
To sum up, in the short term, with the improvement of domestic copper cathode supply, the demand is expected to exceed the supply. The spread between SHFE 2205 and 2206 copper contracts will remain rangebound within the range of 100-200 yuan/mt in a backwardation structure.

 

 

 

 

 

 

2.Copper Prices Fell Sharply, and Some Cargo Holders Held the Prices Firm

Today, the spot price of refined copper in north-China reported 100 yuan/mt discount to 100 yuan/mt premium against the front-month contract, and the average price premium was 0 yuan/mt, down 10 yuan/mt compared with the previous trading day. The transaction price was 74,360-74,630 yuan/mt, and the average price was 74,495 yuan/mt, down 720 yuan/mt compared with the previous trading day. Today, the copper prices remained decline, and the overall transactions were significantly lower than that of the previous trading day. In terms of spot, the copper prices fell, and the attitudes of the holders were different. Some of the holders with tight inventory continued to hold the price firm, but some major holders continued to reduce the price for shipment. Overall, the average spot transaction price fell only slightly by 10 yuan/mt today.

 

3.Import Market was Still Sluggish due to the Rising LME Copper and the Weakened Price Ratio

Yangshan copper premiums stood at $10-30/mt under warrants today.   The average price was $20/mt, flat from the previous trading day.   Quotes under B/L stood at $12/mt-$29/mt.   The average price was $20.5/mt, flat from the previous trading day, with the quotation period of May.   The quotation refers to the prices of goods arriving at ports in the second half of April.   The discounts of LME 0-3 were $17.5/mt.   The import losses were around 750 yuan/mt over the 2205 copper contract.  

Import traders indicated that affected by the pandemic, the customs clearance and transportation efficiency were extremely low.   Documents of banks and logistics companies could not be sent or received as usual, hence small orders could not be picked up without these documents.   Besides, LME copper prices rose after opening, weakening the price ratio.   Therefore, no quotes were offered in the import market.

For now, the high-quality pyro-copper premiums were around $30/mt under warrants, and mainstream pyro-copper and hydro-copper were quoted at $25/mt and $10/mt respectively.   The high-quality copper under the bill of lading was quoted at $29/mt, and that of mainstream pyro-copper and hydro-copper were $24/mt and $12/mt respectively.

 

 

 

 

 

4、SHFE Copper Stood Firm at over 75,000 yuan/mt, while Spots Premiums Dropped Quickly

Shanghai copper cathode spots were quoted at premiums of  270-400 yuan/mt over 2205 contract today. The average premium was 335 yuan/mt, down 185 yuan/mt from the previous trading day. Standard-quality copper was traded at 75,420-75,590 yuan/mt, and the high-quality copper was traded at 75,500-75,660 yuan/mt. SHFE copper prices slightly dropped after rising to 75,400 yuan/mt. The prices generally hovered around 75,250 yuan/mt.

Spot premiums fell due to the high futures prices. At the beginning of the early trading today, standard-quality copper stood at over 400 yuan/mt, suppressing the transactions. The quotes fell from 370 yuan/mt to below 300 yuan/mt because of the lowered quotations from some traders and the inflow of some imported copper.  At the end of the trading, goods quoted at premiums of 250-270 yuan/mt flowed out. Quotes of high-quality copper were relatively firm, with the premiums slightly falling from 420 yuan/mt to 350 yuan/mt. Accordingly, the transactions in the market were rare. The inflow of imported sources aroused fear in downstream markets, so the premiums of hydro-copper were lowered to around 200-250 yuan/mt.

On the second trading day of the 2205 copper contract, spot premiums dropped rapidly due to the high futures prices and the improved logistics in Shanghai and its surrounding areas ordered by the central government. Last week, as the SHFE/LME zinc price ratio continued to rise and the import losses decreased significantly, the customs declaration of imported copper increased. Premiums in the Shanghai market are unlikely to remain firm as the imported sources may increase in the following days. While premiums in Jiangsu and Zhejiang were driven by the rigid demand and still maintained high at around 400-500 yuan/mt. If the pandemic prevention and control in Shanghai tend to loosen, the regional differences in premiums are expected to continue to narrow.