SHANGHAI, Oct. 24 (SMM) –The Shanghai Composite Index slipped 4% and financial markets were described as in a panic. In response, SHFE copper prices fell from RMB 56,780/mt, and closed down by the daily loss-limit on Thursday. On Friday, SHFE copper prices opened at a new yearly low of RMB 50,760/mt, and added to the weekly loss of over 10%. Short investors increased selling pressure and significantly expanded new positions.
Negative news from the US and European markets will impact SHFE copper prices, with financial factors expected to dominate markets. Aggressive selling pressure from short investors will cause SHFE copper prices to fall below RMB 50,000/mt and look for support at RMB 48,000/mt or RMB 45,000/mt in the coming week.
In the spot market, as the SHFE/LME copper price ratio continued to fall and increase losses for copper importers, offers for imported copper remained firm and supported higher copper premiums. Cargo-holders of domestic copper took this opportunity to actively move goods in order to generate cash, but hedged copper came into the market, keeping market supply adequate. SHFE near-term copper contract prices were higher than SHFE forward-month copper contract prices, so speculators chose to buy spot copper and sell SHFE copper contracts based on pessimism towards future copper prices. Downstream producers with adequate downstream orders made purchases at low prices, while speculators were restricted by higher copper premiums, keeping overall market transactions lower than the previous week.
In the coming week, imported copper used for financing will come into the market. Due to the approach of the month's end, capital pressures will force cargo-holders to move goods for cash generation, so imported copper supply will improve. Overall sufficient market supply will remain unchanged, which will restrict the extent that copper premiums can increase. If copper prices fall below RMB 50,000/mt and are attractive to downstream producers and speculators, low-end SHFE copper prices will find support.