Yangshan copper premiums with a quotation period in July stood at $39-53/mt under warrants during June 19-21, with the average down $1.5/mt from Friday June 16. Those stood between $40-53/mt under bill of lading with a quotation period in July, with the average down $9/mt. As of June 21, the SHFE/LME copper price ratio stood at 8.11, and import losses stood at 1,060/mt against the SHFE July copper contract.
For warrants, the high premiums in the domestic spot market limited the declines in Yangshan copper premiums compared to bill of lading, narrowing the price spread between warrants and bill of lading to nearly zero. The overall demand was extremely poor. Only some traders purchased cargoes to meet their mid-year trading targets. Some sellers of cargoes slated to arrive in late July lowered their quotes to reduce losses. Import losses did not expand further on the back of continuous inventory declines in China. Some market participants undertook arbitrage operations between SHFE and LME markets.
If premiums in the domestic spot market inch down, more domestic mainstream smelters will export cargoes, which will help the SHFE/LME copper price ratio rally. As of last Wednesday, traded import premiums for high-quality pyro-copper stood at $52/mt under warrants, and $46/mt for mainstream pyro-copper. Those for hydro-copper stood at $40/mt. On the B/L front, premiums stood at $50/mt for high-quality copper, $45/mt for mainstream pyro-copper, and $40/mt for hydro-copper.
As of Wednesday June 21, copper inventories in the domestic bonded zones decreased 7,000 mt from June 16 to 71,900 mt, according to the latest SMM survey. Inventory in the Guangdong bonded zone remained flat, and inventory in the Shanghai bonded zone fell 7,000 mt to 71,900 mt. High premiums in the domestic spot market boosted sales at one point last week. Sellers that had locked in import profit continued to import cargoes. There will be concentrated shipments arrivals after the Dragon Boat Festival holidays, but most of the cargoes will directly go to the domestic market. As such, bonded zone inventories should fall further.
