SHANGHAI, Jun. 19 (SMM) – LME copper rallied to USD 7,600/mt as the crisis of Greece withdrawing from the Euro zone eased temporarily, helping SHFE 1209 copper contract, the most active one, started significantly up by RMB 680/mt at RMB 55,440/mt Monday. After the opening, an increasing US dollar caused LME copper to come under pressure at USD 7,600/mt. With growing selling pressures for SHFE forward copper contracts, the most active copper contract fell gradually and narrowed gains amid position closings, down to a low at RMB 54,980/mt. In the afternoon, as LME copper stopped sliding, SHFE 1209 copper contract rallied and hovered weakly around the daily moving average before finally ending at RMB 55,210/mt, up RMB 450/mt or 0.82%. Trading volumes and positions for SHFE 1209 copper contracts fell by 89,072 lots and 17,654/mt, while trading volume and positions for SHFE 1210 copper contract increased by 54,558 lots and 19,838 lots, highlighting the continuous shift of the most active copper contract, which should be completed Tuesday. Longs became more willing to keep up with the rising prices during the day, and the support at the 30-day moving average for SHFE copper will be tested repeatedly for the near future.
SHFE copper prices rebounded, but spot copper offers turned into premiums after SHFE 1206 copper contract was delivered. Spot copper premiums were quoted between positive RMB 150-250/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,650-55,750/mt, and RMB 55,680-55,850/mt for high-quality copper. Cargo-holders in spot markets quoted prices a little late and held prices firm at the lows. They especially offered high premiums to move goods near the midday. However, some traders increased purchase volumes voluntarily owing to optimism towards future copper prices, contributing the most to market transactions. Downstream producers, though, kept on the sidelines since they were skeptical over continuous copper price rebounds.
SMM conducted a survey with regard to copper price trends this week.
Based on the survey, 57% of market insiders are optimistic about the outlook, believing LME copper will likely hold to the 20-day moving average of USD 7,530/mt before increasing to the 30-day moving average of USD 7,675/mt and that SHFE copper will rally to RMB 56,000/mt. The pro-bailout New Democracy Party in Greece has won the vote, so Greece will not exit the Euro zone over the near term, helping improve market sentiment and boosting copper prices. The US dollar index closed down for five consecutive days and has retreated below the 30-day moving average, with only support at the 60-day moving average while its technical indicators continue to point downside, another positive factor for this week's copper prices. Gold and crude oil prices have successfully consolidated in the near term based on technical indicators and are likely to extend gains during the week. In China's domestic markets, the social insurance funds were again allowed to enter markets again in May following the same move seen seven months ago, so Chinese stock markets are likely to stop falling and begin stabilizing, which will provide support for domestic copper prices. Spot copper offers have turned into premiums again after SHFE 1206 copper contracts were delivered and are favorable for copper prices. Hence, these insiders expect copper prices to reach highs this week.
33% of market insiders anticipate copper prices to fluctuate at current values this week, LME copper around USD 7,500/mt and testing between the 5 and 20-day moving averages, and SHFE copper between RMB 54,500-55,500/mt. The recent US economic figures are sluggish and markets are negative about this week's housing starts and existing home sales. However, market speculation the Federal Reserve (Fed) will introduce loose monetary measures is heightening. Hence, copper faces difficulties to either move higher or trend lower. US equity markets will likely fall from initially surging, which will restrict copper prices to rebound. Besides, both selling pressures and buying support were limited after LME copper rebounded Monday, and longs and shorts competed severely at RMB 55,000/mt on the SHFE market, and they will shun risks ahead of the Dragon Boat Festival Friday. As such, these insiders hold the view copper prices will lurch this week.
The remaining 10% of insiders are pessimistic, expecting LME copper will sink to around USD 7,400/mt and that SHFE copper will test support at RMB 54,000/mt. Although the possibility of Greece quitting the Euro zone falls, uncertainty prevails, while government bond yields in Spain and Italy remain high. This means European countries still face an uneven road to tackle their debt problems in the future. The Euro zone will announce the PMI data for June, which is expected by markets to remain weak, dampening the euro's movements this week. According to the latest CFTC reports, net short positions have reached as high as 14,952 lots. On the copper fundamentals side, LME copper stocks rose by 19,775 mt last week and will depress copper prices. As the SHFE/LME copper price ratio improves, more imported copper will flow into domestic markets. SHFE copper rebounded but suffered selling at the highs. Copper demand remained slack even during the seasonal peak demand period and will remain so during July and August. Therefore, these insiders see copper prices falling this week.