Shanghai copper premiums dipped further after the Tomb-Sweeping holiday amid sluggish sentiment, as bills of lading cargoes which had failed to be sold out before arriving were transferred to China’s bonded warehouses.

The most recent assessments and offers were quoted in the range of $50-70 per tonne on an in-warehouse basis in Shanghai on Thursday March 9, down $5 per tonne from Metal Bulletin sister publication Copper Price Briefing's assessment a week ago.

Premiums for ocean cargoes were quoted in the same range this week, also down $5 per tonne from Copper Price Briefing’s assessment last week.

Arbitrage this week saw an improvement from before the holiday, although that did not encourage buyers to place orders, said market participants.

Import losses this week were around 1,000-1,200 yuan ($163-196) per tonne, compared with over 1,500 yuan per tonne last week, according to Copper Price Briefing's calculations.

“Small factories have been the main factor behind worse demand this year. Orders from big factories show little change from a year ago, but many small ones have delayed their starting date over and over this year,” said a Shanghai-based trader.

Narrowed interest rate spreads and difficulties in opening letters of credit continued this week, resulting in less imports and rising stocks in bonded warehouses.

“I have stopped quoting ocean cargoes these days, as I already have sent some cargoes to the warehouse and have got warrants in hand now,” said a second trading source.

More ocean cargoes that failed to be sold out before arriving were transferred to bonded warehouse, she added.

According to market sources, about 50,000 tonnes of stocks have been added at bonded warehouse during the past month, with stock levels now at around 600,000-620,000 tonnes.

High long-term premiums impact

Late last year, Metal Bulletin reported that Chinese buyers had reduced their long-term contract volumes because of the big gap between spot and long-term offers. Codelco’s benchmark premiums were set at $133 per tonne for 2015, while Chinese smelters offered $128 per tonne.

Less bookings on the long-term side mean more material is now being offered in the spot market, which has burdened the supply side, said a third Chinese trader.

“Shanghai premiums climbed a bit after the Chinese New Year holiday, as hopes on the [government] policy side made many people think Chinese demand would pick up soon. That encouraged trading houses to place orders at that time, as a result of which we now see more cargoes here,” he said.

Kiki Kang
Wechat: KikiKang_MB