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Shanghai copper premium gets lift from low inventories

Keywords: Tags  copper premium, Shanghai premium, copper inventory, copper, copper stocks

SHANGHAI — Copper premiums in Shanghai reached $220 per tonne this week on tight spot availability after stock levels in the country’s warehouses sank below 500,000 tonnes.

Premiums were quoted at $205 to $220 per tonne in Shanghai Aug. 6 vs. $195 to $205 per tonne Aug. 2.

"Most indicators pointed to tightness in supply. On the other hand, downstream buyers were discouraged by the high premiums and were sidelined," a trader from Shanghai said, noting that material of Chilean origin had reached $210 per tonne last week.

Copper inventories in Chinese warehouses stood at about 500,000 tonnes in July after peaking at 1 million tonnes in March. Stocks held in bonded warehouses have fallen to 300,000 tonnes, Judy Zhu, an analyst from Standard Chartered Bank, told investors in a note.

Inventories held in official Shanghai Futures Exchange warehouses stood at 163,571 tonnes for the week ended Aug. 2.

The forward curve on the Shanghai Futures Exchange showed a backwardation, with August contracts trading at a 700 yuan ($114) premium to the November contracts.

The SHFE/LME price ratio was 7.4 on Aug. 6, meaning Chinese traders will suffer a loss of 509 yuan ($83) on each tonne of copper they import.

A version of this article was first published in AMM sister publication Metal Bulletin.

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