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China copper premiums hit record high on tight stocks, VAT issue

Reuters | November 20, 2021 | 7:04 am Markets Copper

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Copper premiums in China hit record highs as the administrative issue over value-added tax (VAT) on imports exacerbates tight supply amid stocks at decade-low at the largest global metal consumer.

The premium of physical copper over Shanghai Futures Exchange (ShFE) prices jumped to 2,200 yuan (US $ 344) per tonne on Friday, according to data from industry information and pricing provider SMM.

This represents a massive 80% increase from the previous day’s over-seven-year high and marks the highest daily valuation of records dating back to 2012.

Copper has recently been offset on the ShFE and the London Metal Exchange (LME), where prices for immediate delivery are higher than for future delivery. Copper stocks in warehouses recorded by ShFE fell 8.2% from last week to 34,918 tonnes on Friday, the lowest since June 2009.

To make matters worse, China’s General Customs Administration has informed companies, including copper importers, that it will temporarily stop issuing VAT invoices this week, three sources familiar with the matter said as it seeks to defer some tax revenue to 2022.

This could discourage buyers from importing copper, wrote Anna Stablum, broker of Marex Spectron, in a note, causing the metal to decrease in the market.

Importers pay a 13% VAT deposit on refined copper, one of the sources explained, and might not be able to collect it for a month and a half because customs won’t issue invoices for it. worth more than 200,000 yuan before January, thus increasing their funding. costs.

Customs did not immediately respond to a request for comment sent by fax.

Stablum said the customs decision came a month earlier than the usual year-end deadline and created a cash flow problem.

“This led to a sudden shortage of equipment in an already tight market, as foundries threatened to ship equipment overseas to ease the tightness of the LME,” she wrote.

(US $ 1 = 6.3886 Chinese renminbi yuan)

(Reporting by Tom Daly, Emily Chow and Mai Nguyen; additional reporting from Beijing Newsroom. Editing by Jane Merriman and David Evans)