SHANGHAI, Sept. 19 (SMM) –As the Shanghai Composite Index failed to rise above 2,500 points, and since LME copper prices drifted significantly lower during the week, SHFE copper prices opened nearly RMB 1,500 down on the first trading day after China's Mid-Autumn Festival holiday. Momentum from short investors was strong, and as of Thursday, overall trading volumes for all SHFE copper contracts were up 300,000 lots, while positions were up nearly 90,000 lots. SHFE copper prices fell below all the moving averages and fluctuated between RMB 65,000-66,500/mt, down nearly 4% for the week. September 15th was the delivery day for SHFE 1109 copper contracts, with both long and short investors significantly increasing positions for SHFE 1112 copper contracts, which became the most actively-traded copper contracts on Friday.
In China, markets generally believe September CPI data will remain high since August CPI was little changed from July, which will keep China's Central Government unchanged in its desire to control commodity prices. As a result, current tight credit conditions for investors and enterprises will remain unchanged.
In spot markets, cargo-holders last week were eager to move goods to generate cash as hedge trading reported profit-taking and since the price gap between SHFE 1109 and 1110 copper contracts was over RMB 500/mt, making market surpluses more pronounced. Due to improvement in the SHFE/LME copper price ratio and a reduction in losses, finance-driven copper imports were the first to make transactions at a discount of negative RMB 200/mt, near the break-even point. As a result, spot copper offers also were made at discounts even as SHFE copper prices fell sharply and the delivery date approached. Downstream producers and traders increased purchases at the lows, and market transactions improved compared with the prior week.
In the coming week, spot copper will not be able to maintain premiums due to ample supply and cargo-holders' eagerness in moving goods for cash generation.