Shanghai Futures Exchange Suspends Bonded Delivery for Copper and Aluminum Futures

Shanghai Futures Exchange has halted the settlement of copper and aluminum futures that used bonded warehouse deliveries, effective immediately. The bonded stockpiles, created in 2010, let traders keep metal in duty‑free sites and only pay value‑added tax when they bring it into China, which helps them sell abroad when overseas prices are high. The exchange said the pause is because interest in the program has fallen, citing two unnamed sources familiar with the matter. SHFE did not give a comment outside regular hours. Deliveries from bonded sites surged in 2018 after an export window opened, but they are usually more expensive and less actively traded. The Yangshan premium, a measure of what Chinese importers pay above London Metal Exchange rates, climbed past $200 a tonne on Wednesday, close to a historic high. Some analysts view the move as a safety step to keep a tight supply, noting that copper stocks in China are lower than typical for this season. Jia Zheng, trading manager at Suzhou Chuangyuan Harmony‑Win Capital Management, said the suspension could curb metal outflows driven by price gaps between Shanghai and foreign markets. He added that the effect should be small for copper contracts and a bit larger for aluminum.

Context

Bonded deliveries have been a tool for Chinese exporters to manage taxes and timing of shipments. Removing this option may reduce arbitrage opportunities and could tighten metal supplies for overseas buyers.