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SMM Copper Market Daily Review (2012/10/8)
Oct 9,2012 10:50CST
price review forecast
SHFE 1301 copper contract ended RMB 530/mt or 0.89% lower at RMB 58,930/mt Monday. An SMM survey showed 20% of market insiders believe copper prices may rally this week.

SHANGHAI, Oct. 9 (SMM) – As LME copper prices moved down following the opening, SHFE 1301 copper contract, the most active one, started slightly RMB 60/mt down at RMB 59,400/mt Monday. After the opening, as LME copper prices came under pressure on an increasing US dollar, and as Chinese A-shares retreated, SHFE copper prices also moved lower after the opening. With short selling, SHFE copper prices fell to an intraday low at RMB 58,780/mt in the afternoon. SHFE 1301 copper contract ended RMB 530/mt or 0.89% lower at RMB 58,930/mt, with trading volumes and positions up by 4,120 lots and 32 lots, respectively. Coming under pressure at the 10-day moving average completely, SHFE copper prices found weak support at the 5-day moving average.

SHFE copper prices fell after a down opening, but cargo-holders in spot copper markets chose to move goods stably, helping copper discounts to narrow considerably. Mainstream spot copper discounts were largely negative RMB 20-150/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 59,050-59,150/mt, and RMB 59,150-59,300/mt for high-quality copper. But as copper prices slipped, market pessimism grew, and spot copper supply increased, leading copper discounts to expand gradually. Nevertheless, cargo-holders of high-quality copper exhibited unwillingness in moving goods and widened the price gap with standard-quality copper. Traders were not eager to enter markets, while downstream producers replenished stocks in small quantities. In the afternoon, SHFE copper prices continued falling, but spot copper market activity was still limited. Cargo-holders reduced sale volumes when prices dipped below RMB 59,000/mt and offered discounts of negative RMB 40-150/mt in the afternoon. Traded prices also fell slightly to RMB 58,980-59,300/mt.

SMM conducted a survey with regard to copper price trend this week.

Based on the survey, 20% of market insiders believe copper prices may rally, expecting LME copper can return to USD 8,300/mt and SHFE copper will challenge resistance at around RMB 59,500/mt. The US economic figures made prominent performance during China's National Day holiday period, with the unemployment rate falling below 8% for the first time in four years, an indication that the US economy is still recovering. Markets are also positive about this week's US initial jobless claims and other economic data, which may help US equity markets extend rebounds and thus drive copper prices up. From the latest CFTC reports, net long positions already rose to 9,014 lots from 5,132 lots as of October 2, which will also help guide copper price trend. The proportion of cancelled warrants to total LME copper stocks also increased significantly to over 24% during the National Day holiday period, while spot copper offers on the LME also turned to slight premiums from discounts. In China's domestic markets, as the 18th National Congress draws near, investors expect that a set of loose monetary policies will be introduced, so tight cash flows will improve gradually and help enliven activity on domestic futures and stock markets. The price gap between SHFE 1210 and 1211 copper contract is merely around RMB 100/mt, and if the gap narrows further as the delivery day for SHFE 1210 copper contract approaches, spot copper discounts may continue to fall and even turn to slight premiums. In this context, copper prices are likely to increase from earlier lows.

60% of market insiders see copper prices stay within the previous trading range, with LME and SHFE copper prices expected to lurch around USD 8,200/mt and RMB 59,000/mt, respectively. The European debt crisis will continue to weigh on copper markets. Senior Greek government officials said October 6 that some progress had been made between the Greek government and its international creditors on new austerity measures, but markets hold the view that the consensus is unlikely to be reached ahead of the Eurogroup meeting. Greek finance minister Stournaras hoped the EU, ECB, and IMF can give positive assessments on Greece's reforms during the Eurogroup meeting, while the Greek Prime Minister Samaras said when accepting interviews of German newspaper Handelsblatt that Greece's capital will be used up should a new loan be not issued before the end of November. Spain is also hesitant on rescue at present as its Prime Minister Rajoy said October 5 the government reconsidered on the rescue but would finally make the most favorable decision. This means there are too many uncertain factors in the euro zone. Moreover, the US dollar will challenge resistance at 80 following significant rebounds Monday with technical indicators pointing upside, which will exert great resistance to copper prices. Obama will control crude oil prices ahead of the presidential election to stabilize the US economy and curb inflation, but investors favor gold as its prices broke resistance at the highs several times. As such, these insiders anticipate copper prices to fluctuate at current values.     

The remaining 20% of market insiders are pessimistic over the outlook, expecting LME copper prices will retreat below USD 8,100/mt and that SHFE copper prices may fall to RMB 58,200-58,300/mt. Technical indicators for both LME and SHFE copper are pointing downside, and LME copper prices came under pressure at recent three daily moving averages and lowered to search support at around USD 8,080/mt, the 30-day moving average. Chinese A-shares were also down on the first trading day of October, but IPO verification will be started again. In addition, according to the latest statistics, as unlocked shares increased, industrial capital in Chinese A-shares market rose to 52%. However, Chinese A-shares face great pressures to retreat over the near term and will significantly dampen market confidence once losing 2,000. Traders were unwilling to buy at the lows during the first trading day following the holiday even when copper prices fell, with cautious sentiment spreading, while downstream producers also stood on the sidelines. Therefore, these insiders believe that copper prices will slip this week.  

SHFE copper prices
SHFE trading volumes
SHFE positions

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