SHANGHAI, Feb. 23 (SMM) – 60% Chinese copper producers expect LME copper to break through USD 4,700/mt this week and SHFE 1604 copper will increase above RMB 36,500/mt.
See SMM Price Forecast, Please Click: LME Copper to Crawl Up Next Week
First, soft economic figures from China trigger expectation for more loose monetary and credit policies. Destock measures in China’s housing market are expected during the NPC & CPPCC period. Second, optimistic outlook over Chinese stock market will dive commodity prices up. Speculators will rush to enter stock market during the NPC &CPPCC period and margin balance has registered four consecutive gains, leaving upside room in Chinese stock market. Third, strong expectation for peak demand in March and April give longs incentive to enter market and consumption will pick up with return of downstream buyers. Finally, US dollar index will move at lows with resistance at the 20-day moving average and slowing pace of interest rate increase by Fed, boding well for copper prices. CFTC reports net long positions for dollar reduced 3,671 to 31,342 during the week ending February 16, reflecting most investors are bearish towards dollar.
40% market players see copper prices to move in current level this week. They note that LME copper will range USD 4,600-4,695/mt and SHFE 1604 copper will hover between RMB 35,650-36,350/mt. Improved sentiment sends copper prices up but worries about mounting inventories still exist. Copper inventories on the SHFE rocketed by 14.8% or 35,622 mt to a record high of 276,904 mt as of February 19 since SHFE copper was introduced in 1993. This was due to continuous inbound shipments of copper imports during Chinese New Year holiday. Moreover, crude prices bounce back from lows recently but the gains will not be sustainable. Based on the CFTC report, net long positions in crude market decreased 28,890 to 187,877 during the week ending February 16. This reveals that bearishness in crude market warms up, depressing copper prices.