Shanghai copper premium jumps to 2,615 yuan as stocks thin

Spot copper in Shanghai traded at an average premium of 2,615 yuan a tonne over the Shanghai Futures Exchange November contract on Friday, up 515 yuan from the previous session, Shanghai Metals Market said, as Chinese stocks kept falling a day after US warehouses were shown to hold 70% of London Metal Exchange copper.

SMM quoted #1 cathode at premiums of 2,480 to 2,750 yuan over the 2611 contract. The average spot price fell 605 yuan to 109,600 yuan a tonne, so the higher premium offset part of the decline in futures. The backwardation between adjacent months stood at 1,900 to 2,260 yuan, and imports against the 2611 contract showed a profit of 590 to 1,330 yuan a tonne.

The import premium moved with it. SMM put Friday's average Yangshan warrant premium at $217.50 a tonne, up $7.50 from Thursday's $210, in a range of $200 to $235, and said imported copper premiums had hit record highs repeatedly. EQ copper on a CIF bill-of-lading basis averaged $108, up $8. Offers for registered ER copper bills of lading ranged from $200 to $250, SMM said, describing offers as "somewhat chaotic" across shipment periods and brands.

Stocks thin

SMM attributed the rise mainly to tight spot supply, with limited arrivals of both domestic and imported metal in east China. Its count of copper social inventory in major Chinese regions fell to about 60,000 tonnes as of Nov. 5, roughly 140,000 tonnes less than a year earlier. SHFE copper warrants dropped 1,271 tonnes in a day to 6,574 tonnes.

A separate exchange series, reported by Reuters, showed copper stocks in SHFE warehouses down more than 24% this week to 33,848 tonnes, the lowest in almost three years and less than a day's worth of Chinese consumption. "Timespreads are pointing to the scarcest environment for ShFE copper since 2022," Deutsche Bank said in a note cited by Reuters.

The 2611 contract expires on Nov. 16. If some registered-brand cargoes are set aside early for delivery, SMM said, supply available to spot buyers will stay tight.

The premium is now meeting resistance from buyers. According to SMM, some downstream processing enterprises have halted part of their production lines, actual purchasing demand has weakened and negative feedback from high premiums is gradually emerging. Some suppliers offloaded cargoes during Friday's session, and SMM said a retreat from highs cannot be ruled out.

London moved the other way. Benchmark three-month LME copper was down 0.8% at $13,738 a tonne as of 10:30 GMT on Friday, after touching $13,636, its lowest since July 30, Reuters reported, putting the metal on track for its steepest weekly loss since the week ended March 20 amid a rout in technology stocks. Cash LME copper traded at a $117.50 premium over three-month metal. Craig Lang, principal analyst at CRU, told Reuters he would be cautious about calling the dip a sustained correction, given "ongoing mine supply challenges and exceptionally tight metal availability outside the US."

Supply from China's own smelters offers little relief. Falling sulphuric acid prices are squeezing plants that already process concentrate at negative fees, and two managers at China Smelters Purchase Team member companies told Reuters that production cuts were coming, without giving details.

More imported copper is expected at Chinese ports over the weekend, SMM said, and the open import window favours customs clearance of bonded and near-port cargoes. Vessel controls in waters around the China International Import Expo run until Nov. 10, however, and may still slow unloading. SMM expects Shanghai premiums to hold near highs next week, and to retreat if weekend arrivals clear customs together while downstream buying weakens further.

(With files from Reuters)