SHANGHAI, Jun. 11 (SMM) – Earlier last week, SHFE copper prices experienced heavy selling due to a lack of guidance from LME prices, hitting a fresh low for the year at RMB 52,330/mt. SHFE copper prices then rallied after the LME market resumed trading, rising above the 5-day moving average and touching a high of RMB 54,260/mt, but investors still chose to exit positions as prices surged. The People’s Bank of China (PBOC) announced Thursday evening it was cutting interest rates by 0.25%, but Chinese stock and commodity markets continued to fall on Friday, with the Shanghai Composite Index falling below 2,300 and SHFE copper prices to around 53,000/mt, a drop of 5.3% for the week. Total positions for all SHFE copper contracts grew by over 27,000 lots compared to the previous week and trading volumes increased by around 1 million lots.
In spot markets last week, transaction volumes increased significantly early last week. As SHFE copper prices hit a 2012 low, spot copper premiums rose to RMB 350-400/mt, while traded prices stood at nearly RMB 54,000/mt, attracting some traders and downstream producers to buy at the lows and leading to active market activity. But as copper futures prices rebounded, spot copper cargo-holders were more willing to sell, causing spot copper premiums to fall to RMB 250-350/mt. Imported copper supply rose significantly, keeping total spot copper supply sufficient. The price gap between standard and high-quality copper was limited, which restricted market transactions. Market participants turned cautious again on Friday when pessimism towards copper prices grew.
SMM anticipates SHFE copper will fall RMB 53,000/mt in the coming week, possibly hitting a new yearly low of RMB 52,300/mt.