Explanatory factors of the Yangshan copper import premium

Sammanfattning

This thesis estimates a regression model to identify the key drivers of the Yangshan Copper Premium. The Premium is defined as the price differential between imported refined copper delivered through the Yangshan bonded area in Shanghai (SHFE) and the LME copper price (benchmark). The analysis is motivated by recent structural changes in smelter economics. Particularly the emergence of negative values for treatment charges (TC) which challenge their conventional role as an indicator of copper concentrate market tightness. To account for this shift, the model is estimated over two distinct periods representing market conditions before and after the structural break. In the first period, the Yangshan Premium is mainly driven by exchange inventories and an interaction term involving TC and sulphuric acid prices. In the later period, TC-based measures lose explanatory power while exchange rates and inventory levels emerge as more important drivers. Overall, the findings suggest that the explanatory factors of the Yangshan Premium are regime-dependent, and traditional indicators have become less reliable under current market conditions.