Copper Spreads Widen as Demand Pressures Continue Amidst Industrial Slowdown

Metals – LME copper spreads widens

LME copper cash/3m spread widened to a record contango of a little more than US$70/t this week (although this narrowed to a little less than US$57/t yesterday) as copper demand in the physical market remains under pressure due to slower industrial activity in China and elsewhere. Tepid demand has led to a significant increase in exchange inventories. LME copper inventories increased to a fresh one-year high of 164kt with inflows of around 110kt since mid-July. Meanwhile, LME data shows that speculative net longs in LME copper dropped by 12,501 lots over the last week with their net long position falling to a 3-month low of 43,441 lots as of 22 September.

The latest data show that China’s gold imports from Hong Kong increased to 45.2 tonnes over August compared to around 30.2 tonnes in July as demand for precious metals remains strong in the domestic market. Cumulatively, China’s gold imports from Hong Kong increased by 36% YoY to 359 tonnes over the first eight months of 2023. Looking ahead, gold demand in China is likely to have improved further this month as reflected by the high premium for gold in the local market. Shanghai gold currently trades at a premium of around US$100/oz over international prices.