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SMM Copper Price Forecast (Aug. 29-Sept.2)
Aug 29,2011 14:03CST
smm insight
Source:SMM
Cautious speculative funds will restrict SHFE copper prices' upward momentum, but low-end prices will be supported by modest buying.

SHANGHAI, Aug. 29 (SMM) –Last week, SHFE copper prices fluctuated between RMB 66,000-67,000/mt and continued to struggle around the 5 and 10-day moving averages. Both positions and trading volumes declined, with trading volumes falling more than 33% for the week, which also served to reduce speculative activity.

China's government reiterated its commitment to control commodity prices and keep prudent monetary policies in place, so even if Chinese stock markets stop falling, it will not likely support SHFE copper prices to rebound in the short term. Cautious speculative funds will restrict SHFE copper prices' upward momentum, but low-end prices will be supported by modest buying.

Last week, domestic copper supply in spot markets was sufficient, and imported copper supply was up due to the improved SHFE/LME copper price ratio. Cargo-holders were active moving goods for cash generation at the month's end, causing spot copper premiums to fall. Due to copper price fluctuations, downstream producers were not eager to build stocks. Speculative buying also waned due to the lack of profits at premiums of positive RMB 100-150/mt, resulting in market oversupply.

In spot markets, cash flows will be tight due to the approach of the month's end. Spot copper supply should be ample and imported copper supply will increase as the SHFE/LME copper price ratio rises. However, few downstream producers will be able to purchase due to cash flow pressures, so oversupply will become more pronounced and reduce copper premiums.
 

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