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The Growth Rate of Social Inventory Has Significantly Slowed Down, and the Market Holds a Tight Supply Expectation for the Future [SMM Copper Morning Meeting Notes]

  • Feb 28, 2025, at 1:10 am
[SMM Morning Meeting Summary: Significant Slowdown in Social Inventory Growth, Market Expects Tight Supply in the Future] Overnight, LME copper opened at $9,452.5/mt, dropped back slightly at the beginning of the session, then rose to a high of $9,466/mt. Subsequently, it fluctuated downward, hitting a low of $9,368/mt near the session's end. It rebounded slightly at the close, finally settling at $9,413/mt, down by 0.11%. Trading volume reached 18,000 lots, and open interest stood at 295,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 77,140 yuan/mt, quickly hitting a high of 77,330 yuan/mt at the beginning of the session. It then fluctuated downward, reaching a low of 76,930 yuan/mt near the session's end. It rebounded slightly at the close, finally settling at 77,150 yuan/mt, up by 0.16%. Trading volume reached 29,000 lots, and open interest stood at 162,000 lots.

Futures Market: Overnight, LME copper opened at $9,452.5/mt, initially dropped back slightly, then rose to a high of $9,466/mt. Subsequently, it fluctuated downward, hitting a low of $9,368/mt near the session's end, before rebounding slightly to close at $9,413/mt, down 0.11%. Trading volume reached 18,000 lots, and open interest stood at 295,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 77,140 yuan/mt, peaked at 77,330 yuan/mt early in the session, then fluctuated downward, hitting a low of 76,930 yuan/mt near the session's end, before rebounding slightly to close at 77,150 yuan/mt, up 0.16%. Trading volume reached 29,000 lots, and open interest stood at 162,000 lots.
[SMM Copper Morning Briefing] News: (1) According to MiningWeekly, Ivanhoe Mines announced a new discovery at Makoko West in the DRC. The Makoko West copper deposit is part of Ivanhoe's Western Forelands exploration area, extending westward into the new license area Ivanhoe will acquire later in 2024. The new license expands Ivanhoe's mining rights by 20%.
Spot Market: (1) Shanghai: On February 27, mainstream standard-quality copper against the front-month contract was quoted at a discount of 130-110 yuan/mt, and high-quality copper at a discount of 100-80 yuan/mt. According to SMM, this week, inventory buildup continued only in Shanghai and Chongqing, while inventories in major consumption areas such as Guangdong and Jiangsu declined. Suppliers held a tight supply outlook for the market, with rumors of production cuts at some smelters. Spot premiums are expected to rebound tomorrow due to stocking demand ahead of the weekend.
(2) Guangdong: On February 27, Guangdong #1 copper cathode spot prices against the front-month contract were quoted at a discount of 70-10 yuan/mt, with an average discount of 30 yuan/mt, up 5 yuan/mt from the previous trading day. Hydro copper was quoted at a discount of 170-130 yuan/mt, with an average discount of 150 yuan/mt, up 30 yuan/mt from the previous trading day. The average price of Guangdong #1 copper cathode was 76,865 yuan/mt, down 205 yuan/mt from the previous trading day, while hydro copper averaged 76,745 yuan/mt, down 180 yuan/mt. Overall, despite a three-day inventory decline, shipments remained high, and spot premiums only edged up slightly.
(3) Imported Copper: On February 27, warehouse warrant prices were $30-40/mt, QP March, with an average price down $4/mt from the previous trading day. B/L prices were $48-60/mt, QP March, with the average price flat from the previous trading day. EQ copper (CIF B/L) was quoted at -$4/mt to $4/mt, QP March, with the average price flat from the previous trading day. Quotes referenced cargoes arriving in mid-to-early March. Market inquiries during the day focused on registered cargoes arriving in March, with transaction prices remaining firm. Domestic smelters increased FOB offers, fearing significant inventory buildup in bonded zones due to exports. Warehouse warrant prices continued to run at low levels, and EQ counteroffers dropped to discounts due to weak SHFE/LME price ratios.
(4) Secondary Copper: On February 27, secondary copper raw material prices fell by 100 yuan/mt MoM. Guangdong bare bright copper was priced at 70,500-70,700 yuan/mt, down 100 yuan/mt from the previous trading day. The price difference between primary metal and scrap was 1,669 yuan/mt, up 137 yuan/mt MoM. The price difference between primary and secondary copper rods was 795 yuan/mt. According to the SMM survey, the consumption peak season is approaching, but terminal wire and cable enterprises hold a pessimistic outlook. Maintaining production levels on par with previous years is considered the best-case scenario. Consequently, with weak downstream demand, inventories of secondary copper rods have risen to varying degrees.
(5) Inventory: On February 27, LME copper cathode inventories decreased by 1,375 mt to 263,650 mt. On the same day, SHFE warrant inventories increased by 1,399 mt to 154,676 mt.
Prices: Macro side, US initial jobless claims for the week ending February 22 recorded 242,000, the highest since the week ending December 7, 2024, indicating signs of an economic slowdown. However, Trump's clear statement that tariffs on Canada and Mexico will be implemented on March 4, with reciprocal tariffs to follow on April 2, overshadowed the signs of economic slowdown. The US dollar surged, pressuring LME copper, while SHFE copper found strong bottom support. Fundamentals side, as of Thursday, February 27, SMM data showed copper inventories in major regions nationwide increased slightly by 2,000 mt from Monday to 376,000 mt, up 19,000 mt from last Thursday and 210,000 mt from pre-Chinese New Year levels. This week's inventory growth has significantly slowed. Looking ahead to next week, suppliers hold a tight supply outlook, with rumors of production cuts at some smelters, while consumption is expected to improve. In terms of prices, with stocking demand ahead of the weekend, copper prices are expected to stabilize.
[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]

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