SMM Daily Review – 2012/4/9 Copper Market

SMM Insight 10:01:19AM Apr 10, 2012 Source:SMM

SHANGHAI, Apr. 10 (SMM) –The most actively-traded SHFE 1207 copper contract opened RMB 90/mt higher at RMB 60,160/mt Monday. China's National Bureau of Statistics (NBS) in the morning announced that China's Consumer Price Index (CPI) for March rose by 3.6% YoY, while Producer Price Index (PPI) fell by 0.3% YoY, compelling SHFE copper prices to slide rapidly. But as some long investors entered the market, SHFE copper prices were pushed up to levels above the daily moving average and basically fluctuated narrowly around RMB 60,200/mt in the afternoon trading. At the tail of trading, Chinese stock markets fell from previous highs, and positions were closed in large quantities, which led SHFE copper prices to lose the RMB 60,000/mt point before sink to an intraday low at RMB 59,810/mt. Finally, SHFE 1207 copper contract prices ended RMB 230/mt or 0.38% lower at RMB 59,840/mt. Positions and trading volumes for 1207 copper contracts increased by 4,250 lots and 38,188 lots, respectively. Long and short investors continued to struggle at the RMB 60,000/mt mark during the day, but SHFE copper prices failed to break resistance at RMB 60,400/mt, the 20-day moving average. Besides, LME copper market would resume trading Tuesday, so short term speculators kept cautious at the tail of trading. Hence, SHFE copper prices were likely to lurch near current levels over the near term.

The NBS announced China's CPI rose in March from the previous month, leading SHFE copper prices to fall rapidly. Hence, market activity was active at lower copper price levels in spot copper markets. Nevertheless, as copper prices rallied from the lows, copper consumption was restricted again. Due to a lack of guidance from LME copper prices, cargo-holders opted to move goods in limited quantities, helping copper discounts narrow further to between negative RMB 50-0/mt. Traded prices for standard-quality copper were between RMB 59,380-59,550/mt during the day, and RMB 59,420-59,600/mt for high-quality copper. Cargo-holders of high-quality copper insisted on offers around discounts of negative RMB 0/mt, which caused its price gap with standard-quality copper to become relatively small. Most downstream producers generally took a wait-and-see stance during the first trading day of this week, keeping overall market transactions limited. 

Will copper prices keep current trading range this week?

According the latest SMM survey, 20% of market insiders are pessimistic about the outlook, believing LME copper prices will retreat to USD 8,300/mt and SHFE copper prices will fall to between RMB 59,000-59,500/mt. Although the euro zone has announced to raise the maximum loan offered by ESM and EFSF from EUR 500 to EUR 700 billion, Spanish bond yields soared to the highest since November 30th last year, which at the same time drove up the cost of French banks issuing government bonds. This means uncertainties in the European debt crisis are resurfacing, sending the euro on a downward track, which will weigh on commodity markets. The latest US nonfarm payrolls only added 120,000, only half of February level and also well below market expectations of 203,000, and the smallest increase since October 2011. The Dow Jones Industrial Average is likely to fall further after sliding below the 30-day moving average, which will drag the financial market down, while the US dollar is trying to stabilize at 80. China's CPI for March rebounded from the prior month, and markets are more pessimistic about March trade data and annual rate of 1Q GDP, which will cap commodity demand and negatively affect the global economy. LME copper warrants increased by 9,150 mt during the Qingming Festival holiday period, meaning that the falling trend for cancelled warrants slowed. From CFTC reports, net positions for Comex copper were only 9,529 lots as of April 3rd, and fund managers changed their optimistic sentiment towards future copper prices. Technically, LME copper prices have fallen below all moving averages with technical indicators pointing downside. Hence, these insiders expect copper prices to fall this week.

50% of market insiders contacted by SMM predict copper prices will continue to fluctuate this week, with LME copper prices expected around USD 8,450/mt and SHFE copper prices between RMB 60,000-60,500/mt. The SHFE/LME copper price ratio remains low, which has caused more than RMB 3,000/mt losses for copper importers. Some speculators have begun to conduct the operation of “buying SHFE copper but selling LME copper”, forming a false image that copper supply is tight. Against this backdrop, copper markets are unlikely to adjust significantly over the near term. Crude oil prices have recently lurched at high levels with strong support near USD 100 per barrel. As of April 3rd, more than half of domestic listed companies released their annual reports for 2011, which showed net profits fell by 27% YoY for some companies. Net profits for China's state-owned companies also slid by 19% YoY for the first two months of 2012, and the drop was higher than market expected. In this context, Chinese stock markets will unlikely to rebound further but continue to struggle around 2,300. In Chinese spot markets, despite sluggish copper consumption during the traditional peak demand period, buying is active below RMB 59,000/mt, injecting confidence into markets. Therefore, these insiders hold the view copper prices will continue to fluctuate this week.  

The remaining 30% of market insiders are optimistic, expecting LME and SHFE copper prices will rebound to USD 8,500/mt and RMB 60,500/mt, respectively. This Friday will be the last trading day for SHFE current-month copper contracts, so cargo-holders will gradually quote prices at premiums. Besides, improvement in downstream consumption will also support premiums. As such, copper prices will hopefully exhibit strong performance this week.

 
 

Key Words:  copper daily review  

SMM Daily Review – 2012/4/9 Copper Market

SMM Insight 10:01:19AM Apr 10, 2012 Source:SMM

SHANGHAI, Apr. 10 (SMM) –The most actively-traded SHFE 1207 copper contract opened RMB 90/mt higher at RMB 60,160/mt Monday. China's National Bureau of Statistics (NBS) in the morning announced that China's Consumer Price Index (CPI) for March rose by 3.6% YoY, while Producer Price Index (PPI) fell by 0.3% YoY, compelling SHFE copper prices to slide rapidly. But as some long investors entered the market, SHFE copper prices were pushed up to levels above the daily moving average and basically fluctuated narrowly around RMB 60,200/mt in the afternoon trading. At the tail of trading, Chinese stock markets fell from previous highs, and positions were closed in large quantities, which led SHFE copper prices to lose the RMB 60,000/mt point before sink to an intraday low at RMB 59,810/mt. Finally, SHFE 1207 copper contract prices ended RMB 230/mt or 0.38% lower at RMB 59,840/mt. Positions and trading volumes for 1207 copper contracts increased by 4,250 lots and 38,188 lots, respectively. Long and short investors continued to struggle at the RMB 60,000/mt mark during the day, but SHFE copper prices failed to break resistance at RMB 60,400/mt, the 20-day moving average. Besides, LME copper market would resume trading Tuesday, so short term speculators kept cautious at the tail of trading. Hence, SHFE copper prices were likely to lurch near current levels over the near term.

The NBS announced China's CPI rose in March from the previous month, leading SHFE copper prices to fall rapidly. Hence, market activity was active at lower copper price levels in spot copper markets. Nevertheless, as copper prices rallied from the lows, copper consumption was restricted again. Due to a lack of guidance from LME copper prices, cargo-holders opted to move goods in limited quantities, helping copper discounts narrow further to between negative RMB 50-0/mt. Traded prices for standard-quality copper were between RMB 59,380-59,550/mt during the day, and RMB 59,420-59,600/mt for high-quality copper. Cargo-holders of high-quality copper insisted on offers around discounts of negative RMB 0/mt, which caused its price gap with standard-quality copper to become relatively small. Most downstream producers generally took a wait-and-see stance during the first trading day of this week, keeping overall market transactions limited. 

Will copper prices keep current trading range this week?

According the latest SMM survey, 20% of market insiders are pessimistic about the outlook, believing LME copper prices will retreat to USD 8,300/mt and SHFE copper prices will fall to between RMB 59,000-59,500/mt. Although the euro zone has announced to raise the maximum loan offered by ESM and EFSF from EUR 500 to EUR 700 billion, Spanish bond yields soared to the highest since November 30th last year, which at the same time drove up the cost of French banks issuing government bonds. This means uncertainties in the European debt crisis are resurfacing, sending the euro on a downward track, which will weigh on commodity markets. The latest US nonfarm payrolls only added 120,000, only half of February level and also well below market expectations of 203,000, and the smallest increase since October 2011. The Dow Jones Industrial Average is likely to fall further after sliding below the 30-day moving average, which will drag the financial market down, while the US dollar is trying to stabilize at 80. China's CPI for March rebounded from the prior month, and markets are more pessimistic about March trade data and annual rate of 1Q GDP, which will cap commodity demand and negatively affect the global economy. LME copper warrants increased by 9,150 mt during the Qingming Festival holiday period, meaning that the falling trend for cancelled warrants slowed. From CFTC reports, net positions for Comex copper were only 9,529 lots as of April 3rd, and fund managers changed their optimistic sentiment towards future copper prices. Technically, LME copper prices have fallen below all moving averages with technical indicators pointing downside. Hence, these insiders expect copper prices to fall this week.

50% of market insiders contacted by SMM predict copper prices will continue to fluctuate this week, with LME copper prices expected around USD 8,450/mt and SHFE copper prices between RMB 60,000-60,500/mt. The SHFE/LME copper price ratio remains low, which has caused more than RMB 3,000/mt losses for copper importers. Some speculators have begun to conduct the operation of “buying SHFE copper but selling LME copper”, forming a false image that copper supply is tight. Against this backdrop, copper markets are unlikely to adjust significantly over the near term. Crude oil prices have recently lurched at high levels with strong support near USD 100 per barrel. As of April 3rd, more than half of domestic listed companies released their annual reports for 2011, which showed net profits fell by 27% YoY for some companies. Net profits for China's state-owned companies also slid by 19% YoY for the first two months of 2012, and the drop was higher than market expected. In this context, Chinese stock markets will unlikely to rebound further but continue to struggle around 2,300. In Chinese spot markets, despite sluggish copper consumption during the traditional peak demand period, buying is active below RMB 59,000/mt, injecting confidence into markets. Therefore, these insiders hold the view copper prices will continue to fluctuate this week.  

The remaining 30% of market insiders are optimistic, expecting LME and SHFE copper prices will rebound to USD 8,500/mt and RMB 60,500/mt, respectively. This Friday will be the last trading day for SHFE current-month copper contracts, so cargo-holders will gradually quote prices at premiums. Besides, improvement in downstream consumption will also support premiums. As such, copper prices will hopefully exhibit strong performance this week.

 
 

Key Words:  copper daily review