Business · Energy & Commodities · 7 hrs ago
Shanghai Exchange Halts Bonded Deliveries for Copper and Aluminum Futures
The Shanghai Futures Exchange halted bonded-warehouse deliveries for copper and aluminum futures in China.
These deliveries used metal held in warehouses where traders could delay paying value-added tax until they imported it through Chinese customs.
Traders could instead sell the metal overseas when prices made that worthwhile.
The exchange said the move was due to dwindling interest in the business, while some analysts see it as a way to limit metal leaving China amid low copper inventories.
Chinese import demand is strong, with the Yangshan premium above $200 a ton on Wednesday, near a record high.
The effect is expected to be limited, though bonded deliveries have been more common for aluminum than copper, and the suspension took effect immediately.
The Shanghai Futures Exchange has suspended bonded-warehouse deliveries for copper and aluminum futures, effective immediately.
The exchange said the decision was due to dwindling interest in the businesses, according to two people familiar with the matter.
Bonded stockpiles have allowed traders to defer paying value-added taxes until importing metal into China is worthwhile.
Some analysts said the suspension could help slow metal outflows as Chinese copper inventories are below typical levels for this time of year.
The impact is expected to be limited, with little bonded delivery for copper contracts and more for aluminum, trading manager Jia Zheng said.
- Who
- The Shanghai Futures Exchange suspended the deliveries.
- What
- It halted settlement of copper and aluminum futures using deliveries from duty-free warehouses.
- When
- The exchange announced the decision on Thursday. It took effect immediately.
- Where
- At the Shanghai Futures Exchange in China.
- Why
- The exchange cited dwindling interest in the businesses, according to two people familiar with the matter. Some analysts viewed the move as a precaution against a supply squeeze.
This story does not have two clearly opposing sides.
Bonded stockpiles were introduced, giving Shanghai traders flexibility to sell metal to international markets.
Activity with bonded deliveries picked up when an export window opened.
The Yangshan premium surpassed $200 a ton.
The exchange announced it would halt bonded deliveries for copper and aluminum futures, effective immediately.
- Effective date
- Immediately after the Thursday announcement
- Metals affected
- Copper and aluminum
- Bonded stockpiles introduced
- 2010
- Yangshan premium
- More than $200 a ton on Wednesday
- Exchange's stated reason
- Dwindling interest in the businesses
What people are saying
The suspension of bonded delivery could help slow outflows of metal from China when arbitrage between Shanghai and overseas prices motivate such a trade