What is Happening in the Yangshan Copper Market This Week?

The Yangshan copper market experienced significant structural shifts during the week of June 23-27, 2025, with fragmented performance across different premium categories. The weekly average for B/L transactions reached $61.6/mt, reflecting a $1/mt week-over-week increase, while warrant premiums averaged $37.6/mt, declining by $2/mt compared to the previous week. These divergent trends highlight the complex dynamics currently shaping the offshore copper market.

According to Shanghai Metal Market (SMM), "The offshore market performance is fragmented, with frequent changes in structural premiums," indicating a volatile trading environment that requires careful navigation by market participants. This fragmentation is further complicated by recent tariffs and copper prices affecting global markets.

Key Premium Indicators and Price Movements

• B/L Transaction Premiums: $48-75.2/mt (July QP), averaging $61.6/mt (+$1/mt WoW)

• Warrant Premiums: $30-45.2/mt (June QP), averaging $37.6/mt (-$2/mt WoW)

• EQ Copper CIF B/L: $3.2-14.8/mt, averaging $9/mt (-$2/mt WoW)

• SHFE/LME Price Ratio: 8.0858 (as of June 20)

• Import Profit Margin: Approximately -1,400 yuan/mt

• LME Backwardation: 3M-July at $88.97/mt; July-August at $42.2/mt

The negative import profit margin of -1,400 yuan/mt signals that importing copper remains unprofitable for Chinese traders, creating pressure for alternative supply strategies. This economic reality, combined with the SHFE/LME ratio of 8.0858 (below the typical breakeven point of 8.10), explains much of the market's current fragmentation.

How Are Different Copper Categories Performing?

The market is experiencing notable differentiation between copper categories, with high-quality materials commanding significant premiums while other grades face availability challenges.

Premium Structure by Copper Type

Warrant Premiums

• High-Quality ER Copper: Firm offers at $44/mt

• Pyrometallurgical & Domestic Warrants: $30-40/mt

• SX-EW Spot Cargo: Limited availability

ER (Electrolytic Refined) copper, known for its purity exceeding 99.99%, continues to command the highest premiums due to its application versatility in high-precision electronics and premium electrical applications.

B/L Transaction Premiums

• High-Quality Copper: Limited availability

• Pyrometallurgical & Domestic B/L: $40-60/mt

• SX-EW Spot Cargo: Limited availability

The scarcity of SX-EW (Solvent Extraction-Electrowinning) copper stems from operational constraints at several key production facilities, particularly in South America where maintenance schedules have affected output volumes.

EQ Copper Premiums

• CIF B/L Price Range: $0-10/mt

• Average Price: $5/mt

The EQ copper segment, representing lower-grade material, continues to experience suppressed premiums due to quality concerns and substitution preferences among end-users.

What's Driving the Current Market Anomalies?

The copper market witnessed several unusual developments this week, primarily driven by LME price structure dynamics and strategic responses from market participants.

LME Backwardation and Market Response

The week began with an extraordinary widening of the LME Cash-July price spread, which exceeded $250/mt backwardation. This extreme market condition, coupled with the TOM-NEXT spread reaching $50/mt, triggered significant market reactions:

• Increased Export Activity: Domestic smelters boosted exports to address the widening SHFE/LME price ratio imbalance

• Strategic Shipments: Approximately 35,000 mt of copper cathode was positioned to arrive at LME Asian warehouses before the July date

• Re-export Phenomenon: A surge in non-domestic re-export B/L purchases emerged

• European Redirection: Some domestic warrants reportedly being exported to Europe to replace European smelter cargo destined for the US

This backwardation scenario—where spot prices exceed futures prices—creates economic incentives for immediate delivery rather than storage, fundamentally altering typical trading patterns. As SMM notes, "Domestic smelters increased exports to repair the SHFE/LME price ratio," demonstrating how market participants actively respond to structural price signals.

Market Fragmentation Results

These dynamics created a bifurcated market where:

• Premiums for domestic warrants and non-domestic re-export B/Ls remained elevated

• Premiums for domestic and EQ B/Ls continued declining due to the unfavorable SHFE/LME price ratio

The fragmentation reflects not just price differentials but also strategic positioning by market participants anticipating potential shifts in the coming weeks.

What's Happening with Global Copper Flows?

The global copper supply chain is experiencing significant regional shifts that are impacting market dynamics. Recent global copper supply forecast data indicates these shifts may continue throughout 2025.

Regional Supply Distribution

• African Exports: Maintaining approximately 20,000 mt monthly copper cathode exports to the US

• South American Supply: Constitutes the majority of US import supply, with less than 25,000 mt shipped to China monthly

• European Demand: Diverting a portion of African copper cathode supply

This redistribution of global flows has created notable supply tightness in non-US regions, particularly Asia. According to SMM analysis, "South America accounts for most US import supply," leaving Asian markets to compete for remaining output.

The redirection of African cathode to European markets represents a significant shift from historical patterns, where African production traditionally served a more balanced portfolio of global destinations.

Future Outlook

These supply dynamics suggest:

• Continued LME backwardation structure

• Persistently high near-month backwardation

• Delayed recovery of the SHFE/LME price ratio

Industry analysts project that these flow patterns will likely persist through Q3 2025, barring significant production increases or demand shifts in key consumption regions.

How Are Bonded Zone Inventories Changing?

Copper inventories in domestic bonded zones showed notable increases during the reporting period.

Inventory Changes (as of June 26, 2025)

• Total Bonded Zone Inventory: 68,400 mt (+4,100 mt from June 19)

• Shanghai Bonded Inventory: 59,200 mt (+0.22 mt)

• Guangdong Bonded Inventory: 9,200 mt (+0.19 mt)

The weekly inventory increase of 4,100 mt represents a significant 6.4% growth in total bonded stocks, signaling a potential accumulation trend that bears watching.

Inventory Growth Factors

The inventory increase was primarily attributed to:

• Copper cathode exports from domestic smelters arriving at bonded warehouses

• Limited new port arrivals

• Recent increases in bonded warehouses outside Shanghai and Guangdong

SMM specifically highlighted that "the main reason for the increase in bonded area inventory this week was still the arrival of copper cathode exported by some smelters to bonded warehouses," confirming the direct connection between export strategies and inventory buildups.

Forward Inventory Projection

With domestic smelters primarily targeting LME Asian warehouses for exports and the SHFE/LME price ratio expected to remain unfavorable through early July, bonded area inventory is projected to continue its slight upward trend in the coming week.

The increase could be moderated by potential re-export activity, particularly if European demand continues to draw material from Asian bonded zones.

What Should Market Participants Watch For?

Key Market Indicators to Monitor

• LME Backwardation Structure: Continued tightness in the LME forward curve

• SHFE/LME Price Ratio: Potential for recovery beyond early July

• Export Patterns: Changes in domestic smelter export destinations

• Regional Supply Balances: Shifts in copper cathode distribution between US, Europe, and Asia

• Bonded Zone Inventory: Weekly changes as an indicator of market direction

Market participants should pay particular attention to the LME Cash-3M spread, which serves as a leading indicator of near-term supply conditions. Values exceeding $100/mt backwardation typically suggest persistent physical tightness.

Strategic Considerations

• The fragmented nature of the offshore market creates opportunities for arbitrage

• Premium differentials between copper categories may continue to widen

• Supply tightness in non-US regions could sustain the LME backwardation structure

• Market participants should closely monitor changes in the SHFE/LME price ratio for potential normalization signals

Traders looking to capitalize on the current market structure should consider regional arbitrage opportunities, particularly between Asian and European markets where premium differentials remain pronounced. According to China's copper premium market trends, renewable energy industries are driving significant demand shifts.

FAQ: Understanding the Yangshan Copper Market

What factors are causing the fragmentation in the Yangshan copper market?

The market fragmentation stems from several interconnected factors: the significant LME backwardation structure, strategic export decisions by domestic smelters, regional supply imbalances, and the unfavorable SHFE/LME price ratio. These elements have created divergent premium trends between different copper categories and transaction types.

The extreme backwardation (exceeding $250/mt for Cash-July) has been particularly influential, creating economic incentives that alter traditional trade flows and pricing structures.

How is the global copper supply chain being affected by current market conditions?

The global copper supply chain is experiencing a reconfiguration with African exports being diverted between US and European markets, South American supply primarily serving US demand, and Chinese domestic production increasingly targeting export markets. This redistribution is creating tightness in certain regions while contributing to inventory builds in bonded zones.

Monthly African exports to the US have stabilized at approximately 20,000 mt, while South American supply to China has fallen below 25,000 mt monthly, creating imbalances that affect regional pricing. Current surging copper demand is also playing a significant role in reshaping these supply chains.

What might trigger a recovery in the SHFE/LME price ratio?

A recovery in the SHFE/LME price ratio would likely require one or more of the following: a moderation in the LME backwardation structure, increased Chinese domestic demand, reduced export volumes from Chinese smelters, or shifts in global trade flows that reduce pressure on the arbitrage window. Current indicators suggest this recovery may not materialize until after early July.

The ratio would need to exceed 8.10 to make imports economically viable for Chinese buyers, a threshold that appears challenging in the near term given current market conditions.

How do warrant premiums differ from B/L transaction premiums?

Warrant premiums apply to copper that is already stored in bonded warehouses with ownership documentation, while B/L (Bill of Lading) transaction premiums apply to copper that is being shipped but hasn't yet arrived at the destination. The difference between these premiums reflects factors like delivery timing, quality assurance, and market liquidity preferences.

Typically, B/L premiums include additional risk components due to the uncertainty of shipping and potential quality variations upon arrival, explaining why they often differ from warrant premiums for the same material grade. For those interested in deeper market analysis, copper price insights can provide additional perspective on these premium structures.

Further Exploration:

Readers interested in learning more about copper market dynamics can also explore related educational content, such as the weekly market analysis published by Shanghai Metal Market (SMM) at their official website. Additionally, following copper investment trends can provide valuable context for understanding the Yangshan copper market's place in the global commodity landscape.

Disclaimer: This weekly review of Yangshan copper provides analysis based on current market conditions and available data. Market conditions can change rapidly, and participants should conduct their own due diligence before making trading decisions based on this information.

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