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SMM Daily Review - 2011/11/7 Copper Market
Nov 8,2011 10:04CST
price review forecast
SHFE 1201 copper contract prices opened RMB 240/mt up at RMB 59,000/mt on Monday. In a latest SMM survey, about 63% market insiders are pessimistic towards copper prices this week.

SHANGHAI, Nov. 8 (SMM) –SHFE 1201 copper contract prices, the most active one, followed LME copper prices to open RMB 240/mt up at RMB 59,000/mt on Monday. After the opening, SHFE three-month copper contract prices moved lower after touching a high of only RMB 59,130/mt due to great selling pressures, with prices falling down after a high open during the whole trading day. In the afternoon session, SHFE three-month copper contract prices fluctuated around RMB 57,700/mt, and reached a low at RMB 57,580/mt. However, SHFE three-month copper contract prices returned to around RMB 58,000/mt again at the tail of trading as short investors left the market and eased some pressures. Finally, SHFE 1201 copper contract prices closed at RMB 57,950/mt, down RMB 810/mt or 1.38%. Positions for SHFE 1201 copper contracts were down 6,348 lots, and trading volumes were down 235,000 lots. With market activity much weaker than the previous week, SHFE copper prices got weak support at the 10-day moving average.

In the spot market, SHFE copper prices moved lower, and cargo-holders of hedged copper allowed transactions at a discount for profit-taking, dragging spot copper offers down to around premiums of positive RMB 0/mt. Mainstream spot copper offers were quoted between discounts of negative RMB 50/mt and premiums of positive RMB 50/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,300-58,800/mt in the morning business, and RMB 58,350-58,900/mt for high-quality copper. Cargo-holders of domestic standard-quality copper were unwilling to make transactions at discounts and thus reduced sales. Market transactions were restricted given market pessimism towards copper prices this week, with financing demand exceeding copper fundamental demand. In the afternoon session, as SHFE copper prices continued to move at levels, copper premiums held flat with morning business, while traded prices fell to between RMB 58,150-58,550/mt/mt, with cautious trading sentiment.

With regard to copper price trends this week, SMM conducted a survey.

Based on the survey, about 63% market insiders are pessimistic towards the outlook, believing LME copper prices will test RMB 7,500-7,600/mt at the low-end and SHFE copper prices return around RMB 55,000/mt. Futures of the Euro-zone area remain unknown since Italy's debt problems need to be resolved, and since French also has to solve its own economic problems after the country's credit ratings were questioned. This means it's still impossible for the Euro-zone area to get out of its debt issues even if Greece's debt woes tend to ease compared with earlier stages. In the US, a job creation plan proposed by the Obama administration last week meets difficulties again and the two political Parties in the US will not reach consensus over the short term. Combined with volatile commodity markets and unstable investor confidence, LME copper prices lack upward momentum. From recent copper price movements, LME and SHFE copper prices face great technical pressures at USD 8,000/mt and RMB 60,000/mt, respectively, and will remain so if there is not any big positive event. Copper consumption in China's spot market is weak, and cargo-holders of imported copper are moving goods at a discount because of the steady drops in the SHFE/LME copper price ratio, which will not support SHFE copper prices. In general, copper prices will be in the face of systematic risks and are likely to experience another round of declines.   

The remaining 37% insiders expect there will not big fluctuations in copper prices this week. They predict LME copper prices will move between USD 7,700-8,000/mt and SHFE copper prices will fluctuate in the RMB 56,000-59,500/mt band. Despite bearish market sentiment and volatile copper price trends, some positive factors will help copper prices to continuously fluctuate this week. The US dollar index faces increasing pressures at above 77 after rebounding from the lows, which will ease pressures on copper prices. Economic data in the US is improving, and markets are positive about the initial jobless claims and other economic figures to be announced this week, boosting market confidence. In the Euro-zone area, despite some uncertain factors, Greece's cancel of national referendum and proposal of building unity government confirm that the Euro-zone countries are willing to make efforts to stop a contagion of the European debt crisis. Markets are still hopeful towards the Euro-zone Finance Minister meeting this week. From the copper fundamental side, LME copper inventories have fallen by more than 10%, and cancelled warrants have been high, which will help copper prices show more resilience. In China, China will release important economic data including October CPI data, which is expected to experience a turning point following September's 6.1%. If the final CPI data for October is in line with market expectations, China's tightening monetary policy is likely to ease selectively. Given no investment room in the property sector, markets expect Chinese stock markets will be the first choice of investment channel for investors, which will help the Shanghai Composite Index stabilize around 2,500 points and support copper futures prices. As November 15th will be the delivery date for current-month copper contracts on the spot market, copper premiums will appear and provide support for copper price trends. Therefore, copper prices will keep fluctuating this week.


copper daily review; SHFE copper prices

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