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SMM Daily Review - 2011/12/26 Copper Market
Dec 27,2011 09:47CST
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SHFE 1203 copper contract prices opened up by RMB 400/mt at RMB 55,870/mt Monday. Around 62% market insiders anticipate LME copper prices will fluctuate in the USD 7,300-7,600/mt range.

SHANGHAI, Dec. 27 (SMM) –As LME copper prices closed with gains last Friday, SHFE 1203 copper contract prices, the most active one, opened slightly up by RMB 400/mt at RMB 55,870/mt Monday. The LME market was closed for the Christmas holiday. Without guidance from LME copper prices, SHFE three-month copper contract prices were mainly impacted by Chinese stock markets and capitals. As Chinese stock markets met resistance at 2,200 points, and as very fewer short-term long and short investors chose to enter the market during the whole trading day, SHFE three-month copper contract prices moved lower after a high open, with the highest price only reaching RMB 55,940/mt. In the afternoon business, SHFE three-month copper contract prices came under pressure at the daily moving average and slid to an intraday low of RMB 55,060/mt. Finally, SHFE 1203 copper contract prices settled at RMB 55,200/mt, down RMB 270/mt or 0.49%. Positions for SHFE 1203 copper contracts were up 1,608 lots, and trading volumes were up 4,558 lots. SHFE copper prices were unlikely to break out resistance at RMB 56,000/mt over the near term due to tight cash flows at the year's end. 

In the spot market, copper discounts expanded further in the morning session, as spot copper supply was sufficient since cargo-holders of domestic and imported copper were actively moving goods, although SHFE copper prices moved lower after a high open without guidance from LME copper prices. Mainstream copper discounts were between negative RMB 450-330/mt in the morning business. Traded prices for standard-quality copper were between RMB 55,300-55,450/mt, and RMB 55,350-55,600/mt for high-quality copper. Speculators and downstream producers were still restricted by cash flow problems during the trading day, causing market transactions to become extremely light. In the afternoon business, SHFE copper prices continued to fall, while spot copper supply decreased, which led spot copper discounts to stabilize, while traded prices already fell to between RMB 55,150-55,450/mt. Market transactions stagnated in the afternoon session. 

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

Based on the survey, about 19% market insiders believe copper prices will make breakthrough this week, with LME copper prices expected to move towards USD 7,800/mt and SHFE copper prices estimated to test RMB 58,000/mt. US Congress has agreed to extend the payroll tax cut till February 2012, which will benefit the unemployed, while president Obama will continue to urge the Congress to extend the payroll tax cut through 2012 to sustain current achievements that have boosted economic recovery. This will lift commodity markets over the near term, and help copper prices move upward. Markets are positive towards the US economic data to be announced this week, which will help US equity markets increase stably and therefore push up copper prices. The US dollar index will struggle near 80 owing to increasing upside pressures following a rebound above 80, which will exert less resistance on copper prices. Overall, copper prices still have chances to move upside, and will probably experience a round of rises before the New Year holiday.      

Approximately 19% insiders are pessimistic about copper prices this week, expecting that LME copper prices will fall to between USD 7,100 -7,200/mt. The European debt crisis persists, and world's major credit ratings agencies have threatened to cut credit ratings to this region, becoming potential risks for copper price trends. Tight cash flows become more pronounced during the last week of the year, and Chinese stock markets are expected to remain weak, pushing down copper prices. In Chinese stock markets, both downstream producers and speculators have no interest in buying, so weak consumption is unable to support copper prices. Therefore, copper prices will probably drift lower this week.

Around 62% market insiders anticipate LME copper prices will fluctuate in the USD 7,300-7,600/mt range. In addition to intertwined factors, position holdings are inadequate at the year's end, and selling pressures at high price levels and buying support are struggling, which will cause copper prices to fluctuate. In spot markets, some cargo-holders without capital problems, especially smelters, are becoming less willing to move goods given large copper discounts. Nevertheless, speculators having enough money also take the opportunity of expanded discounts to make purchases, which will support low-end copper prices. Hence, copper prices will keep fluctuating this week.  


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