SHANGHAI, May. 7 (SMM) – The China Securities Regulatory Commission (CSRC) announced during the May Day holiday that it would cut handling fees for stock futures market traders, boosting commodity markets. Since cash flow problems eased slightly in early May, the Shanghai Composite Index stabilized at 2,400. However, SHFE copper prices were still volatile and after initially rising to RMB 58,950/mt, began falling as sell-offs began. SHFE copper prices slid through the 5 and 20-day moving averages, and fell as low as RMB 57,900/mt on Friday, only finding support at the 10-day moving average. New positions for SHFE 1208 copper contracts increased by 25,000 lots during the first two trading days of the week, but trading volumes then fell slightly, a sign of cautious investor sentiment.
In spot markets last week, the SHFE/LME copper price ratio retreated to near 7.05, expanding losses for imported copper. In response, imported copper cargo-holders held goods and caused supply to fall. Domestic copper cargo-holders held prices firm, so spot copper discounts narrowed gradually and turned to premiums, and with some high-quality copper quoted at premiums of RMB 100/mt last Friday. Standard-quality copper also traded at a premium of around RMB 50/mt as its price difference with high-quality copper became smaller. Spot copper supply was reported tight last week. Speculators aggressively bought high-quality copper which could be delivered, but then slowed purchases on Friday as premiums rose. Despite some purchasing at the lows, downstream producers were still cautious, leaving market transactions dominated by speculators.
Easing cash flow pressures and rising Chinese stock markets will boost market sentiment and lift SHFE copper prices in the coming week.