Shanghai copper premiums higher as China returns to market

Copper premiums in Shanghai inched higher after market participants returned from the Chinese New Year holiday, although  the depreciation of the Chinese yuan means buying activity has yet to recover.

The most recent assessments and offers were quoted in the range of $85-100 per tonne on an in-warehouse basis in Shanghai, compared with $85-95 per tonne assessed by Metal Bulletin sister publication Copper Price Briefing a week ago.

Premiums for ocean cargoes were quoted in the range of $90-105 per tonne, compared with $90-100 per tonne assessed by Copper Price Brief last week.

“Though the Shanghai-London arbitrage looks not bad these days, fewer buyers are interested in purchasing now as the import losses are still big amid a devalued Chinese yuan. Losses this week have stayed above 1,500 yuan per tonne,” said a Shanghai-based trader.

In addition, China’s latest interest rate cut has narrowed the interest spread between the Chinese currency and US dollar, which makes the return rate even less attractive for market players.

The PBoC cut benchmark interest rates by 25 basis points to 5.35% on February 28 due to increasing downward pressure facing the Chinese economy.

“So the problem now is that people who do financing business are not interested in entering the market, even if they have money in hand,” said a second trading source.

Meanwhile, credit lines to smaller companies have been further tightened, meaning more quotas could have been shared by big players, Metal Bulletin learnt.

“Banks are still very cautious towards metals, especially copper, and some copper traders have shifted to other product areas such as energy or agriculture,” said a second Shanghai trader.

Some physical traders reported more imported cargoes have been seen in the domestic market since the holiday. Favorable domestic premiums for buyers helped transactions pick up, according to market sources.

Copper was trading at a discount of 100 yuan ($16) per tonne in the Shanghai market on Wednesday March 4.

Kiki Kang
kiki.kang@metalbulletinasia.com
Wechat:KikiKang_MB