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SMM Analysis: Spot copper discount deeper at year-end


The discount of spot copper in the Chinese domestic market has continued to go deeper after flipping from a premium in mid-December.

In a short period of just 10 days, the discount has now come down to 330-280 yuan/mt, SMM learned.

Spot copper discounts have become bigger because sellers were keen to offload their cargoes towards the year-end. Higher prices seen both on the LME and SHFE over the past two weeks also led sellers to be more active in making their materials available. However, downstream customers were rather timid in procurement.

Such widening discount amid higher LME copper prices has led to losses of over 1,100 yuan/mt for copper importers, SMM understood. And the slower imports have seen domestic inventories come down slightly.

As of Friday December 22, copper inventory at SHFE stood at 142,000 mt, down by 1,800 mt from a week ago. Stocks at bonded area also came down by 18,000 mt on the week to 469,000 mt. On the other hand, LME inventory levels in Asia have also come down although the overall stocks were up.

As the year-end approaches and many companies closing their books, we think some traders with deeper pockets may look to take advantage of current spot discounts and buy some cargoes. SMM believes the current discount level is close to the bottom.  

Source: SMM