SHANGHAI, Aug. 22 (SMM) –In domestic markets, China's Central Bank announced it will make commodity price controls its main priority. A surge in the central bank bills yield highlighted the government's commitment to tighten monetary measures. As high inflation persists in China, expectations of interest rate increases are growing, but analysts expect the statutory deposit reserve requirement ratio will be left unchanged. As Chinese stock markets will likely lose 2,600 points, and since the whole financial markets are cautious, SHFE daily copper prices will fluctuate in a wider range. Despite upward technical indicators, the seasonal low demand period and cautious investor sentiment will dampen demand for copper. In this context, SHFE copper prices will fluctuate in the RMB 65,500-68,000/mt range, tracking movements in LME copper.
Last week, despite buying interest at low price levels, price volatility actually depressed purchase volumes, with downstream producers continuing to buy on an as-needed basis. Speculative trader buying interest was depressed due to high premiums and no opportunity of hedge trading, keeping market transactions quiet.
In spot markets, copper supply will grow in the coming week as more imported copper will be available due to the improved SHFE/LME copper price ratio. As the RMB continued to appreciate, cargo-holders of imported copper were active moving goods to generate cash, so premiums for domestic copper will not stay high in the coming week. Downstream producers will make purchases on an as-needed basis, but market transactions will improve once copper prices stabilize.