Shanghai copper premiums fell this week amid weak downstream sector and financing demand and rising bonded stocks, market participants said.
Metal Bulletin sister publication Copper Price Briefing assessed premiums at $50-75 per tonne in-warehouse Shanghai basis on Wednesday June 3, down from $55-75 per tonne a week ago.
Premiums were down $5-15 per tonne from levels a month ago.
Premiums for ocean cargoes were quoted in the range of $55-75 per tonne on Wednesday, $5 lower than a week ago, sources said.
An improvement in the arbitrage between Shanghai and London markets was offset by the gloomy outlook on Chinese demand.
“Demand has not got a boost this year. It was just a bit better in April and May compared with earlier in the year,” a trader in Shanghai said.
“It is quite clear that the market is slowing down again and the peak season is close to an end,” he added.
Import losses have narrowed to 500-600 yuan ($81-98) per tonne, from close to 1,000 yuan per tonne last week, according to Metal Bulletin calculations.
However, low financing costs in the domestic market mean there is limited interest among small and mid-sized importers to go through the complicated procedures of obtaining letters of credit from banks to import copper.
“Once the arbitrage window opens, more imported refined copper will flow to the market and supply pressure is going to be high,” a second trading source said.
Stocks Copper stocks on the Shanghai Futures Exchange have declined for seven weeks to reach 156,053 tonnes as of Friday May 29.
Stocks in the domestic market, held by traders and end users, have also fallen in the past few weeks, market participants said.
The trend may not last though, they added.
“The falling stocks are mainly due to three reasons – smelter shutdowns for maintenance, slightly better demand, and smelters controlling release of material to the market,” a Shanghai-based analyst said.
Major smelters such as Jinchuan and Xiangguang carried out maintenance works in May, while Tongling’s plant in Chifeng will start maintenance in June.
Rising copper stocks at Shanghai bonded warehouses are a cause of concern, with some warehouses saying they have “very limited room” for more cargoes, market participants said.
A market poll of Shanghai bonded warehouse stocks by Metal Bulletin stood at 620,000-650,000 tonnes.
“There is little support for copper prices entering into the summer season amid uncertainty about state grid demand and persistent sluggish sentiment in the property market,” a fund manager said.
A recent nationwide industrial standard released by Beijing for the use of low-voltage aluminium alloy-cables is expected to reduce China’s copper demand by 100,000-250,000 tonnes next year, Goldman Sachs said in a note recently.
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