SHANGHAI, Jul. 23 (SMM) –Investors' hope that China's government would introduce additional loose monetary measures helped Chinese stock markets rally last week. SHFE copper prices moved within a RMB 1,000/mt band around the RMB 56,000/mt mark. Earlier last week, SHFE copper prices broke resistance at all moving averages, and rose to as high as RMB 56,500/mt, but different views held by longs and shorts only grew at this price mark. Speculators generally conducted intraday operations since there was virtually no price gap among SHFE copper contracts. The SHFE 1211 copper contract became the most active copper contract last Thursday and SHFE copper prices were showing signs of a rebound based on technical indicators.
In spot markets last week, as SHFE copper prices moved slowly higher, some hedged copper was kept unavailable for trading. The unfavorable SHFE/LME copper price ratio compelled cargo-holders in spot markets to hold high-quality copper premiums at around RMB 100/mt, while cargo-holders of standard-quality imported copper were also able to demand slight premiums despite steady market supply. The lack of any price difference among SHFE copper contracts restricted speculative activity, so trades were merely made to replenish stocks while copper premiums were low. Downstream producers still rejected copper prices above RMB 56,000/mt, only entering markets to purchase at the lows last Friday in anticipation that copper prices would rise in the coming week. Despite replenishment of stocks, overall market supply still exceeded demand.
SMM believes that SHFE copper prices will continue to rise in the coming week and challenge resistance at RMB 56,500/mt, but SHFE gains will lag LME copper gains.