SMM Copper Price Forecast (Mar. 19-23)

SHANGHAI, Mar. 19 (SMM) –SHFE copper met resistance as prices moved higher last week, but found solid support at RMB 60,000/mt following the announcement by China Customs that China's imports of unwrought copper and copper semis hit a record high in February. China's trade deficit was also reported to have posted its largest increase in almost 10 years, and at a press conference at the conclusion of the annual parliamentary session, Chinese Premier Wen Jiabao stressed the government's intention to continue tight regulation of China's housing market. In response, the Shanghai Composite Index lost 2,400, down 2.7%, and severely dampened Chinese copper consumption. SHFE copper prices failed to break through resistance at RMB 61,500/mt, with weakening support at technical indicators. 

SMM believes SHFE copper prices will confirm support at the RMB 60,000/mt mark, and try to break resistance at RMB 61,000/mt.  

In spot markets last week, copper discounts narrowed gradually and turned to premiums as the delivery date for SHFE 1203 copper contracts neared. As the price gap between SHFE 1203 and 1204 copper contract remained near RMB 400/mt, cargo-holders were extremely unwilling to move goods, causing spot copper supply to fall. Downstream producers stayed on the sidelines at prices above RMB 60,000/mt, buying on demand only later last week. Overall market activity remained quiet. 

In the coming week, cargo-holders should become more willing to move goods after SHFE 1203 copper contracts were delivered, so market surpluses are likely. If spot copper discounts expand to RMB 300-500/mt in the coming week, traders will turn to hedge trading since SHFE forward contract prices are currently higher than SHFE near-term contracts. As a result, market transactions will be mainly made by traders.