50% China Copper Smelters Expect Rises for Copper Prices This Week, SMM Survey

SHANGHAI, Jul. 5 (SMM) – SMM survey shows that 50% Chinese copper smelters see LME copper to break through USD 4,950/mt this week and SHFE 1609 copper to grow above RMB 38,500/mt.

Influence from UK’s referendum result wanes away gradually and market expectation for global monetary loosening grows. Chinese yuan depreciated to near 6.66, triggering expectation for inflation in China. A large number of liquids flow into commodity market. The Bank of England indicates a possible rate cut this summer. China’s official and Caixin manufacturing PMI released recently was negative and this may boost more stimulus by China government. With dovish statement of US Fed officials, US dollar will drop easily with resistance at the 5-day moving average. Market sentiment is optimistic and domestic ferrous metals registered gains on Monday, supporting base metals.  

SHFE 1609 copper hit a new high of RMB 38,510/mt since April 25 on Monday with trading volumes up to 680,000 lots. LME copper stocks slid 3,250 mt last week and dropped another 725 mt on Monday. CFTC report indicates that long positions fell 10,147 and short positions were down 23,259 as of last Tuesday, and net short positions decreased 13,112 to 19,814. Technical side for copper prices is also positive.

40% industrial insiders believe that copper prices will remain at current levels this week with LME copper at USD 4,850-4,950/mt and SHFE 1609 copper at RMB 37,500-38,500/mt. Crude oil now fluctuate around USD 49/bbl amid mixed news of recovery in supply and geopolitical tensions. Technical indicators are mixed for both LME and SHFE copper.  

The rest 10% market players are pessimistic over copper prices this week and they predict that LME copper will fall below USD 4,850/mt and SHFE 1609 copper will drop below RMB 37,500/mt. Miners who reported higher costs previously may resume operation with large gains in metal prices. Copper concentrate supply is sufficient at present and TCs stabilize at USD 100-105/mt. Smelters rush to produce and refined copper supply is also abundant. But downstream inquires are limited. East and south China enter rainy season and many producers halt operation, which damps downstream demand.

Heading into June, wire & cable producers see orders fall as Southern Power Grid’s investment in low-voltage power grid is falling and State Grid’s focus lies in UHV power grid and rural power grid transformation. Copper processors built stocks early June when SHFE copper hovered at lows of RMB 35,500/mt. As such, the processors mainly work through inventories now with growing SHFE copper. SHFE copper stocks increased 6,659 mt last week, a reflection of downstream poor demand. Markets expect US non-farm payrolls for June to be positive, which will boost dollar. This will weigh on base metal prices.