SHFE/LME Price Ratio Weakens, Export Window Opens Slightly

This week saw a slight drop in Yangshan copper premiums, mainly due to the deteriorating SHFE/LME price ratio and widening backwardation structure of nearby LME contracts. The ratio stood at 1.1247 as of August 7, indicating an import loss of around 1,385.43 yuan/mt, which is an expansion of about 857 yuan/mt from the previous week. As copper prices surged, downstream consumption demand was poor.

High premiums in the domestic market previously attracted cancelled warrants from LME Asian warehouses, leading to temporary congestion at Shanghai Port. Together with some export cargo pressuring prices, market spot premiums weakened. Mainstream offer prices for ER registered copper B/L dropped to double-digit levels, while mainstream warrant offer prices for registered copper were near $100/mt.

According to SMM data, China's bonded zone copper inventories as of August 6 decreased by about 6,000 mt from the previous period to 31,100 mt. The weekly bonded zone inventory decline was mainly due to reports that cargo ships were heading to the US. Additionally, the slight opening of the export window led to small-scale exports by some smelters to the bonded zone.

Looking ahead, traders' psychological price expectations for spot cargo are rapidly declining, and imported copper premiums are expected to see a temporary pullback due to the siphoning effect from North America. With the export window slightly open, smelters have export expectations. However, future export volumes need continued monitoring, as export volumes in the first week of August up to now have been relatively limited.