SHANGHAI, Aug. 16 (SMM) –SHFE 1110 copper contract prices, the most active one, opened slightly up RMB 170/mt at RMB 67,100/mt on Monday. SHFE copper prices earlier tracked LME copper prices to fluctuate around the daily moving average. Later, SHFE three-month copper contract prices were pushed towards RMB 67,500/mt by the longs, but failed to reach this price mark. Some profit-taking at RMB 67,670/mt weighed down SHFE three-month copper prices, which fell to RMB 66,960/mt. Due to rallies in China’s stock markets and LME copper prices in the afternoon session, SHFE three-month copper prices returned to fluctuate around the daily moving average. SHFE 1110 copper contract prices finally closed at RMB 67,300/mt, up RMB 370/mt or a gain of 0.55%. Positions and trading volumes for SHFE 1110 copper contracts were down 15,512 lots and 20,192 lots, respectively, while positions and trading volumes for SHFE 1111 copper contracts were up 6,364 lots and 18,636 lots, respectively, a sign of the shift of the most actively-traded copper contracts. SHFE three-month copper contract prices moved above the 5-day moving average during the whole trading day, and the shorts closed positions at low prices. Intraday speculative activities remained brisk, but capital inflows eased markedly. Therefore, SHFE three-month copper contract prices were expected to continue to fluctuate in the future, if there is no buying support.
In spot markets, although Monday was the delivery date for1108 copper contracts, downstream producers’ buying interest weakened after SHFE copper prices opened higher. In this context, copper offers were initially quoted between discounts of negative RMB 50 to premiums of positive RMB 50/mt. After the second trading session, as SHFE copper prices fall back, cargo-holders tried to push up offers to premiums of positive RMB 0-120/mt near the midday. Trade prices for standard-quality copper were between RMB 67,150-67,250/mt in the morning business, and RMB 67,200-67,350/mt for high-quality copper. Since markets were not confident about future copper prices, fewer downstream producers entered into the market. Meanwhile small price gap among all SHFE copper contracts made hedge trading impossible. Due to arrival of the delivery date, cargo-holders tried to hold premiums, bringing market transactions into a stalemate. SHFE copper prices continued to fluctuate in the afternoon session, and spot premiums reduced slightly. Spot premiums for high-quality copper were reported at positive RMB 30-80/mt. Standard-quality copper was most imported copper, and offers were made between discounts of negative RMB 20/mt and premiums of positive RMB 0/mt. Traded prices were flat with morning levels. Markets were waiting that spot premiums would return after the delivery date, but market oversupply would remain.
SMM conducted a survey on the copper outlook this week.
Based on the survey, about 71% market players believed copper prices to fluctuate this week. LME and SHFE copper prices will remain weak, with prices expected between USD 8,500-9,000/mt and RMB 63,500-68,000/mt, respectively. After the US Federal Reserve announced to remain low interest rates for at least two years, markets considered the statement as a signal of QE3. However, market panic sentiment hasn’t been completely eased. Based on recent CFTC report, both longs and shorts are cautious towards building positions. Besides, after experiencing copper price declines last week, the SHFE/LME copper price ratio has improved, and price of USD 8,500/mt has gained some domestic buying support. From domestic supply and demand, although downstream producers could replenish stocks at current low price, oversupply will remain in the short term. Coupled with the seasonal low demand period, spot copper discounts are unavoidable. Without firm support in spot copper markets, copper prices will fluctuate.
Approximately 11% market players believed that copper prices will continue to fall. LME copper prices will slump to USD 8,200/mt reached early 2011, and SHFE copper prices will drop to RMB 62,000/mt. Recent global economic data is negative, US job markets will not likely improve in the near term, there are no specific implementation measures of QE3, and market sentiment is dominated by the shorts, all weighing on copper prices. In domestic spot markets, copper discounts appeared on the delivery date. Following the delivery date, spot copper discounts will rapidly return again.
Around 18% market players believed copper prices will rebound slightly this week, believing LME copper prices will likely return above USD 9,000/mt, and that SHFE copper prices will increase above RMB 68,000/mt. The European Central Bank has banned to make short-selling and bought in Euro-zone bonds, helping the euro to rally. Japan also has announced its plan of buying 1.9 trillion bonds. With clear attitudes of all major economies, market sentiment has improved obviously. The US will remain low interest rates to boost economy, and the introduction of QE3 will finally come in the future. The US dollar is on the track of depreciating, which is positive for copper prices. The Dow Jones Industrial Average also has signs of rebounding after falling for 15 straight days, pointing directly to the 10-day moving average. After declining for two weeks, copper prices needs corrections technically. With indicators pointing upside and some buying interest at lows, LME copper prices will likely return to USD 9,000/mt.