SMM Copper Price Forecast (Sept. 5-9)

SHANGHAI, Sept. 5 (SMM) –SHFE copper prices rebounded last week, but the gains were less than LME copper. Without guidance from LME copper prices, SHFE copper prices on Monday moved higher due to strong buying by longs at a low RMB 67,000/mt. SHFE copper prices opened higher over  the past several days, rising from RMB 66,000-67,000/mt in the previous week, to between RMB 67,000 and 68,500/mt, a gain of 1.11% for the week. However, profit-taking by longs, as well as significant declines in positions and weak Chinese stock markets, all limited the upward momentum of SHFE copper prices, which began to feel more resistance at the 60-day moving average.

In the coming week, SHFE copper prices will follow LME copper prices. China will announce August CPI data, with markets mixed as to whether or not the data will show a turning point and China’s Central Bank will be forced to implement more severe monetary policies to control inflation. If August CPI data is positive, expectations of interest rate increases will weaken and SHFE copper prices will move toward RMB 69,000/mt.  

Last week, copper supply was up and the proportion of imported copper of total supply was also higher. Cargo holders were active moving goods to generate cash due to heavy cash flow pressures at the month’s end, causing offers to turn from premiums into discounts of around negative RMB 200/mt. Downstream producers made limited purchases due to cash flows problems and weak orders, but some downstream producers with strong finances and who were optimistic toward future prices took the opportunity to enter markets to purchase raw materials. Market oversupply conditions persisted over the past week.  

In spot markets, supply of imported copper will continue to increase in the following week, but will depress domestic copper prices. Since cash flow pressures will not likely improve in the short term, cargo-holders will be eager to move goods to generate cash, which will help expand spot copper discounts. However, optimism toward future prices will limit expansion of discounts. In addition, the price gap between scrap and refined copper is small, prompting some scrap copper consumers to turn to refined copper markets. Demand will begin to grow at the end of the low-demand period in September, which will also help support copper prices.