Chinese copper market participants showed little interest in importing copper cathodes in the week to Tuesday, April 9, with a firmly closed arbitrage window leaving the market very quiet, sources told Fastmarkets.
The lack of import demand came as the arbitrage window between London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE) copper prices remained firmly closed, making it uneconomical for Chinese buyers to import copper cathodes.
"The arbitrage is closed, so there is no incentive for Chinese buyers to import copper cathodes," a Shanghai-based trader said. "Domestic supply is sufficient to meet demand, so there is no need to import.
"Another trader in China echoed this sentiment, noting that "the import window has been shut for a while now, so Chinese buyers have no interest in bringing in overseas material.
"The lack of Chinese import demand has, in turn, opened up export opportunities for Chinese copper producers, who are now able to sell their material overseas at higher prices compared to the domestic market.
"Chinese producers are now looking to export more copper cathodes as the domestic market is oversupplied and prices are lower," a third trader said. "They can get better margins by selling abroad.
"Fastmarkets' assessment of the copper cathode premium, cif Shanghai, was $20-40 per tonne on April 9, unchanged from the previous week. The premium reflects the additional cost for imported material over the domestic Chinese price.
The quiet trading activity in the Chinese copper cathode market is expected to continue in the near term, with the arbitrage window likely to remain closed as long as the domestic supply remains ample and prices stay low compared to international levels.
