Shanghai bonded base metals stocks diverge in April amid Covid-19 controls; copper build-up slows
The build-up of Shanghai bonded copper stocks continued in April, albeit at a slower pace, with restrictions to prevent the spread of Covid-19 disrupting logistics, particularly earlier in the month
At the same time, nickel and aluminium stocks in the bonded zone fell, while zinc inventories were unchanged.
Copper stocks growth slows
Shanghai bonded copper stocks continued to grow in April, but transport bottlenecks arising from strict Covid controls in the city and improved import arbitrage conditions meant the growth was slower than in recent months.
Fastmarkets assessed Shanghai bonded copper stocks at 277,000-291,000 tonnes on Thursday May 5, up by 7.2% from 258,000-272,000 tonnes on April 6. This, however, was still down by 27.7% from a year earlier.
Shanghai continues to impose lockdown measures to combat the spread of Covid-19, but transport bottlenecks have eased notably in the past two weeks, according to market participants. This, together with improved import conditions, encouraged some buying activity, helping to slow the build-up of copper stocks in the Shanghai bonded zone.
“The movement [of cargoes] is now getting faster and market participants have begun to pick up cathodes from bonded warehouses with arbitrage conditions improving [for imports] from April 27, explaining the slower growth [in copper bonded stocks],” a Shanghai-based trader said.
Fastmarkets’ copper import arbitrage swung to a profit of $30.69 per tonne on April 27, after averaging a loss of $105.52 per tonne over April 1-26.
Import activity also picked up after the market remained in a stalemate for almost one month after Shanghai introduced its lockdown measures on March 28.
Fastmarkets assessed the benchmark copper grade A cathode premium, in-whs Shanghai, at $20-40 per tonne on April 27, marking the first change since March 24. The premium was assessed at $20-45 per tonne on April 29.
Fastmarkets assessed the benchmark copper grade A cathode premium, cif Shanghai, at $20-35 per tonne on April 27, also the first change in the premium since March 24. It was unchanged on April 29 due to relatively low liquidity against the bonded market.
Aluminium stocks continue to slip
Aluminium stocks in the Shanghai bonded zone declined for a third month in April, with a persistently closed arbitrage window preventing cargoes from entering China, while reexporting activity also contributed to the decrease.
Fastmarkets assessed the Shanghai bonded aluminium stocks at 76,000-77,000 tonnes on April 29, down by 1.3% from 77,000-78,000 tonnes on March 31. The latest assessment is still 93.7% higher than that in April 2021, however.
Fastmarkets’ aluminium import arbitrage averaged a loss of $480.63 per tonne in April, widening from an average loss of $552.29 per tonne in the preceding month.
“No one is taking any import offers at present, and there were also fewer exports this month, leaving a quiet market,” a Hong Kong-based trader said.
But the destocking in bonded stocks may continue next month, because logistical constraints since lockdown measures were imposed in Shanghai are expected to ease in May, according to market participants. Furthermore, there had been some reexporting deals done in April that have yet been delivered out.
“I’ve heard some reexports, although the volumes have been lower than last month. Logistic issues is the reason on the one hand, and narrowed arbitrage terms on the other hand,” a second Shanghai-based trader said.
“Some of the reexports were heading to Singapore, and some to Europe as I heard,” the trader added.
Fastmarkets assessed the aluminium P1020A premium, bonded, in-whs Shanghai, at $60-90 per tonne on April 26, unchanged from the end of March amid muted spot market conditions.
Bonded zinc stocks flat
Zinc stocks in the Shanghai bonded zone were stable in April due to limited availability and logistical constraints for exports.
Fastmarkets assessed Shanghai bonded zinc stocks at 16,000-17,000 tonnes on April 29, unchanged from a month earlier but down by 56% compared with April 2021.
Widened import losses in April, coupled with weak demand and stockpiles in the local market, have capped buying appetite for import cargoes and prompted domestic traders to export the metal, according to market participants.
The export volumes during April and May could reach around 20,000 tonnes, participants told Fastmarkets.
Fastmarkets’ zinc import arbitrage averaged a loss of $742.74 per tonne in April, widening from an average loss of $599.78 per tonne in the preceding month.
Fastmarkets’ assessment of the zinc min 99.995% ingot premium, in-whs Shanghai, stood at $80-90 per tonne on April 26, unchanged since December 14, 2021.
Nickel stocks slightly down amid resurgence of Covid-19
Nickel inventories in Shanghai-bonded warehouses decreased slightly in April while the market remained static amid a resurgence of Covid-19 in China.
Fastmarkets assessed Shanghai bonded nickel stocks at 8,000-15,100 tonnes on April 29, down by 1.7% from 8,200-15,300 tonnes on March 31, and also down by 20.1% from a year earlier.
“The bad situation of Covid-19, especially in Shanghai, the financial hub and trading center of China, has affected the whole commodity market and dampened the demand [for nickel full plates],” a third Shanghai-based trader Fastmarkets.
“It is hard to clear the imported cargoes and deliver the goods because of the tighter control measures in Shanghai so there were barely any inflows or outflows from bonded warehouses,” she added.
Shanghai introduced a city-wide lockdown from March 28 to April 5, in a bid to control the rise in coronavirus cases. Most of the city is still under lockdown.
In addition, the loss on importing nickel from London to Shanghai also kept buying appetite among Chinese participants low, sources told Fastmarkets.
Fastmarkets’ nickel import arbitrage averaged a loss of $2,705.01 per tonne in April, narrowing from an average loss of $5,168.25 in March but still considerable enough to deter buying appetite.
Fastmarkets assessed the nickel, min 99.8%, full plate premium, in-whs Shanghai, at $300-350 per tonne on April 26, unchanged since March 8.