Shanghai Futures Exchange Suspends Duty-Free Metal Settlements

The Shanghai Futures Exchange suspended the settlement of copper and aluminum futures involving deliveries from duty-free warehouses on Thursday. This mechanism, which had been in place since 2010, allowed Chinese traders to store metals in bonded stockpiles to avoid value-added taxes unless the materials were imported into China, offering flexibility for international sales.

The exchange stated that the decision followed dwindling interest in these specific business activities. However, the move comes at a time when Chinese copper inventories are below typical seasonal levels. The Yangshan premium, which serves as a gauge for import demand, recently surpassed $200 a ton.

Market analysts suggest the suspension may act as a precautionary measure to prevent a supply squeeze in the domestic market given the current inventory shortages.