en.Wedoany.com Reported - Entering the traditional consumption off-season in July, China's SHFE copper main contract fluctuated mainly within the range of 102,000-104,000 yuan per ton. The strength of the nearby-month contract stemmed from supply-side tightness, with fundamental indicators showing a spot premium structure during the seasonal off-season.
Inventory changes are the most direct indicator, with social inventories destocking by approximately 60,000 tons over the past two weeks. The continuous destocking over multiple statistical periods reflects both real supply-demand factors and unexpected elements, such as the recent impact of typhoons on supply. The persistent decline in spot copper concentrate TC indicates that smelters are still struggling to procure raw materials. During the range-bound consolidation of copper prices, scrap copper has been disrupted by policy factors, with relatively limited arrivals and no consumption advantage in the scrap-copper price spread. Anode plate supply is also relatively tight. The tightness in raw material supply remains a factor that cannot be ignored. China's unexpected decline in June cathode copper production by about 20,000 tons already provides a glimpse of this trend.
From July to August, large smelters are still undergoing maintenance, primarily affecting supply to the East China region. Although efforts are made to keep long-term cathode copper contract supply unaffected, the spot order market is indeed tight. The spot cathode copper market involves paper trading, which locks up some available cargo, making actual spot cargo even scarcer. The price spread between non-registered copper and SX-EW copper has been narrowing rapidly recently. Downstream buyers' willingness to purchase such cargo has increased, partly due to tight scrap copper supply, and partly because, as the marginal price increase for standard and premium copper widens, non-registered cargo becomes more cost-competitive.
Currently, the market is divided on the SHFE copper price of 103,000 yuan per ton, but most downstream companies indicate that new orders exist when copper prices are between 101,800 and 102,800 yuan per ton. Due to concerns about typhoon-related delays in cargo pickup, concentrated withdrawals occurred during last week's working days, with active pickups also seen over the weekend in areas unaffected by the typhoon. Last week, downstream operating rates partially improved, mainly in the rod, wire, and pipe sectors. The aggressive destocking observed last Thursday and this Monday was indeed driven by consumption factors, but supply issues remain the primary cause of the recent sustained destocking. Due to the typhoon, some cargo could not arrive at ports and enter warehouses normally, accelerating the destocking pace over the last two statistical periods. Tight supply, supported consumption, combined with financial factors and typhoon disruptions, all contribute to the expansion of the nearby-month premium structure. Even without the typhoon disruption, based on the aforementioned fundamental factors, the strengthening of the premium structure was already "poised to unfold."
The market worries about whether a large-scale inventory buildup will occur after the typhoon's impact ends, but this is not the case. Recent import cargo arrivals are scattered, and concentrated smelter maintenance is unlikely to end in the short term, so domestic supply will not increase significantly. Even if consumption sentiment eases slightly, a concentrated inventory buildup is unlikely. Against the backdrop of a strong spot premium, most cargo will be stored as spot inventory in warehouses rather than used for futures warrants.
Currently, the proportion of warrant inventory in the Shanghai region is not at an absolute low compared to historical levels for the same period, which limits further expansion of the premium structure. It is expected that as delivery approaches, the SHFE copper nearby-month contract premium could still expand to 300 yuan per ton, while the Shanghai spot copper premium is currently at 200 yuan per ton. Since the start of the upward trend in copper prices in 2024, the coexistence of a futures nearby-month premium and a spot premium has been rare, and recent subtle changes in fundamental indicators have drawn significant attention.
