China Copper Market Enters 'Three Highs' Situation Amid Supply Disruptions
Copper prices in China have been experiencing a high-premium, high-backwardation, and high-price market, known as the 'three highs' market. This situation was triggered by supply disruptions in copper cathode, which forced downstream buyers to accept the current market conditions amid just-in-time procurement and pre-holiday stockpiling sentiment.
The Shanghai spot copper premiums have already risen above 1,000 yuan/mt, while cargoes from large smelters across various regions have largely been pre-booked by downstream buyers. Domestic copper arrivals during the Mid-Autumn Festival and National Day holidays are expected to be relatively limited.
On the import side, cargoes available to flow into China were initially limited due to port congestion, but some shipments are still expected to arrive this week and around the National Day holiday. The SHFE copper forward contract maintains a negative price spread of more than 1,000 yuan/mt against LME 3M copper, which discourages exports.
Despite spot imports showing some profitability, the actual import profit margin is relatively small due to high domestic spot premiums. Attention should be paid to whether canceled cargoes from LME warehouses in Asia will flow to China.