SHANGHAI, May 8 (SMM) – As LME copper prices retreated last Friday on the softer US economic data, SHFE 1208 copper contract, the most active one, opened RMB 470/mt lower at RMB 57,680/mt Monday, and only hovered around RMB 57,500/mt during the day, with a narrow fluctuating band of RMB 150/mt, given a lack of guidance from LME copper. Slightly increasing Chinese stock markets provided some support for the low-end SHFE copper price. With the lowest and highest price at RMB 57,310/mt and RMB 57,730/mt, respectively, SHFE 1208 copper contract finally settled at RMB 57,590/mt, down RMB 560/mt or 0.96%. Trading volumes for SHFE 1208 copper contract increased by 47,476 lots, and positions added by 13,932 lots. As selling pressures from short investors heightened during the day, SHFE copper prices shied away from major recent moving averages and were likely to lose support at RMB 57,500/mt.
SHFE copper prices retreated by more than RMB 500/mt, but increases in spot copper premiums were limited. Spot copper premiums were quoted between positive RMB 50-100/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 57,700-57,760/mt, and RMB 57,730-57,800/mt for high-quality copper. Cargo-holders showed unwillingness in moving goods at lower price levels, and cargo-holders of standard-quality copper especially held price quotes firm. Thus, its price difference with high-quality copper was only between RMB 10-20/mt. Supply of low-end hydro-copper was limited. Trader buying interest was restricted owing to small profit margins, while downstream producers stayed on the sidelines as copper prices fell. Market activity was lackluster in the morning as a consequence. In the afternoon, as SHFE copper prices continued to lurch in a narrow band, quotations for spot copper premiums were little changed from the morning levels. Traded prices, though, edged higher to RMB 57,750/mt in the afternoon, and market activity remained muted.
SMM conducted a survey with regard to this week's copper price trends.
Based on the survey, 47% of market insiders are pessimistic about the outlook, believing LME copper will lower to test USD 8,000/mt and move between USD 8,000-8,150/mt and that SHFE copper prices will test RMB 56,500/mt. Hollande won the French presidential election Monday and has become the first Socialist president in recent 20 years, but he holds different views on solving Europe's debt crisis with German Chancellor Merkel, igniting market worries over unclear prospects for the European debt issues. Leaders in Greece have previously fought for votes to establish coalition government, but voters chose to support for parties that are against the European Union's bailout, which has rekindled market fears whether or not the country can introduce necessary measures to stay in the euro zone. This has added more unstable factors to the euro zone's sluggish economy. Once many economies in Europe slip into a second recession, the euro may hit fresh lows again, probably losing 1.30. The US dollar surged for 5 consecutive days on Monday, and is likely to fluctuate around 80 this week, which will weigh on risky assets. Recent US economic data reveals that the US economic recovery continues to slow, with last Friday's non-farm payrolls standing below market expectations, causing US equity markets to register the biggest one-day decline since early 2012. Risky assets including LME copper thus suffered sell-offs. Meanwhile, crude oil prices retreated to a three-month low last Friday, losing USD 100 per barrel, foreshadowing a pessimistic financial market. From technical indicators, both LME and SHFE copper prices have declined below major recent moving averages. In Chinese domestic markets, copper demand remains slack, even during the traditional peak demand period, which will also drag copper prices down.
16% of market insiders expect copper prices to rally this week, with LME copper expected at USD 8,300/mt and SHFE copper at RMB 58,000/mt, with long investor activity in London eyed. The proportion of canceled warrants to total LME copper stocks have stayed high since early May, remaining at 31.91% May 7, while spot copper premiums in London held firm at USD 85/mt on the same day. According to CFTC reports, net long positions for copper increased to 3,890 lots in the week ending May 1 from the previous week's 2,322 lots. In China, markets expect that the CPI data due this Friday will continue to fall slightly, which will boost Chinese domestic markets and thus support SHFE copper prices. In China's spot markets, spot copper premiums are high, while cargo-holders quote high prices. In this context, these insiders anticipate copper prices will increase this week.
The remaining 37% insiders predict LME copper prices will continue to hover between USD 8,200-8,300/mt and that SHFE copper prices will lurch between RMB 57,000-58,000/mt. The continuously sliding US employment data indicates an uneven road for the US economic recovery. Bernanke said during the Fed meeting that the Fed would consider adopting stimulus measures to boost the economy should the labor market stagnate. Therefore, the US dollar is likely to remain high. Nevertheless, long investor activity in London prevails. In spot markets, offers for spot copper premiums stand high, even before the delivery date for SHFE 1205 copper contract, but market consumers cannot accept high premiums. As such, these market insiders believe copper prices will hover around current values this week.