Shanghai cif copper premiums down in squeezed market

Shanghai cif copper premiums were down by around $5 to $120-125 per tonne on Wednesday May 21 amid an unfavourable arbitrage and a large backwardation in the London market.

Shanghai cif copper premiums were down by around $5 to $120-125 per tonne on Wednesday May 21 amid an unfavourable arbitrage and a large backwardation in the London market.

Premiums fell this week and transactions are flat,” a physical trader told Metal Bulletin. “Warehouse cargoes were sold at a premium of around $120 while B/L cargoes were slightly higher.”

“It is obvious that long positions are squeezing the market currently; traders build up large long positions in the LME market while purchasing actively on the spot market,” another physical trader said.

“This ‘squeezing’ activity boosted both LME and spot copper price with the large 3-month to cash backwardation in LME lending support.”

The LME cash to 3M backwardation was at $48 per tonne on Wednesday May 21.

“Under these circumstances, shorts have to leave the market either by closing their positions suffering losses or buying spot cargoes at a high price,” he added.

“Though the LME copper price fell on Tuesday and prompts have passed, we don’t think the squeezing has ended. A big drop in LME open interest and backwardation will be a sign of the squeeze ending,” he said, adding, “If that happens, copper price will plummet.”

“Large imported cargoes flew to China from the LME with traders keen to sell,” another commodity trader said. “The arbitrage and backwardation, however, are making it costly to store cargoes, resulting in light transactions and falling cif premiums.”

“I think this squeezing may continue for a while and our company is also seeking opportunities to benefit from the large backwardation,” a senior futures trader at one of China’s largest copper trading company told Metal Bulletin.

For information about the specification and methodology for the Metal Bulletin copper concentrates index, click here.

What to read next
Steel trading and production have come to a halt in the eastern Turkish region of Iskenderun following a devastating earthquake that hit the region on Monday February 6 and put mills in the area under force majeure, sources told Fastmarkets on Tuesday
A 120-day closure of four Illinois dams scheduled for 2023 will disrupt barge shipments and have potentially both negative and positive impacts on scrap and finished steel products from Canada to Texas
Market participants are cautiously optimistic about a rebound in iron ore concentrate premiums, with steelmakers around the world set to ramp-up production in line with an anticipated increase in demand for steel products, Fastmarkets understands
General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world
Electrolysis processes developed by Boston Metal and Electra that eliminate the need for coal in steel production could be key to a net-zero emissions future for the metallics industry, attendees learned at Fastmarkets’ conference on January 17-19 in Dallas
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.