SHANGHAI, May. 14 (SMM) – The Shanghai Composite Index retreated to near 2,400, causing SHFE copper prices to lose support at all moving averages. Nevertheless, last Friday afternoon, trading volumes and positions for SHFE copper grew by 1.6 million lots and 32,256 lots, respectively, but with increasingly divergent views from long and short investors. Since SHFE near-term copper contract prices were higher than forward contract prices, speculative activity increased. Investors generally chose to sell at the highs, but buying at the lows also increased. SHFE copper prices moved between RMB 57,200-58,000/mt during the week, gaining support at RMB 57,000/mt several times, which helped marginally improve the SHFE/LME copper price ratio.
In spot markets last week, hedged copper came into markets as SHFE copper prices fell, helping increasing spot copper supply. Spot copper premiums were restricted between RMB 20-100/mt, while traded prices stabilized between RMB 57,500-58,000/mt. Traders chose opportunities to enter markets, while downstream producers purchased on an as-needed basis given the lack of clear market trends. Markets were dominated by cautious sentiment.
Since SHFE near-term copper contract prices are higher than forward contract prices, more investors are buying spot copper and selling copper futures contracts, which will restrict any upward movement in SHFE copper prices in the coming week. Mainstream premiums for spot copper should be between RMB 0-100/mt.