SHANGHAI, Oct. 16 (SMM) – As LME copper prices plunged last Friday, SHFE 1301 copper contract, the most active one, started RMB 900/mt down at RMB 58,230/mt Monday. Following the opening, China announced its CPI and PPI continued falling and restricted LME copper price trend. As Chinese A-shares slipped, SHFE copper prices mainly moved between RMB 58,400-58,600/mt, dipping to a low at RMB 58,230/mt early in the session and touching a high at RMB 58,610/mt. SHFE 1301 copper contract settled RMB 580/mt or 0.98% lower at RMB 58,550/mt, with trading volumes and positions down by 50,532 lots and 296 lots, respectively. Total trading volumes on the SHFE market fell by 43,334 lots, but total positions added by 2,542 lots. There were noticeable signs of increases in positions for forward SHFE copper contracts, and longs and shorts still struggled at RMB 58,500/mt.
As SHFE copper prices fell considerably, and as Monday was the last trading day for SHFE 1210 copper contracts, spot copper premiums returned to markets. Mainstream spot copper offers were between discounts of negative RMB 50/mt and premiums of positive RMB 80/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 58,350-58,450/mt, and RMB 58,450-58,580/mt for high-quality copper. Some traders bought high-quality copper at slight premiums and enlivened market activity. However, near the midday, as forward SHFE copper contracts showed resilient, cargo-holders of high-quality copper became unwilling to sell and raised premiums, leading spot copper supply to decrease. Downstream buying increased as copper prices retreated in the morning, and thus improved overall market activity. In the afternoon, SHFE copper prices remained weak, and spot copper supply decreased further, which caused mainstream spot copper premium quotes to remain between positive RMB 0-100/mt. Traded prices were RMB 58,350-58,450/mt in the afternoon, but market activity became somehow lackluster.
SMM conducted a survey with regard to copper price trend this week.
54% of market insiders are cautious towards the outlook, believing LME and SHFE copper prices will hover around USD 8,100/mt and RMB 58,500/mt, respectively. The European debt crisis prevails as Spain has yet to apply for reuse while markets also focus on Greece's debt problems. The euro struggles among recent moving averages and is unlikely to trend higher, which will drag commodity markets down. Gold and crude oil prices have been fluctuating within their previous range, which will guide copper price trend. This week is LME's annual meeting week, and market transactions will decrease some. But the financial market will meet both limited selling pressures and buying support, helping copper prices stay within prior trading range. The Shanghai Composite Index is struggling around 2,100, but wins temporary support between 2,070 and 2,080. Hence, these market insiders see copper prices lurching this week.
33% of market insiders hold the view that copper prices will extend declines, expecting LME copper prices will lower to test support at USD 8,000/mt and SHFE copper prices will fall to RMB 58,000/mt. The US dollar will likely increase to 80 in the near future and exert pressures to copper prices. From technical indicators, both LME and SHFE copper prices have fallen, with LME copper only finding support at the 60-day moving average. China Monday announced its CPI and PPI continued falling in September and will report the latest GDP data Thursday, which is expected by markets to fall further, and this will weigh on domestic copper prices. In spot markets, copper prices moved significantly lower Monday as SHFE 1210 copper contracts were delivered, but downstream producers were not noticeably seen to buy at the lows. As copper supply increases following the delivery for SHFE 1210 copper contracts, spot copper discounts will return and depress copper prices. Furthermore, traders mostly bought spot copper and sold SHFE copper contracts last week, and if copper prices fall further, profits for hedged copper will increase and compel this part of goods cargo-holders to make profit-taking. In this context, sufficient market supply and weak copper demand will force copper prices down this week.
The remaining 13% of insiders are optimistic over the outlook, anticipating that LME copper may rise to around USD 8,200/mt and SHFE copper will challenge resistance at RMB 58,800/mt. Recent US economic data came in favorable and meant the US economy is still recovering mildly. Markets therefore are positive over this week's home data and PMI data, and US equity markets will probably increase from lows and drive copper prices higher. More importantly, according to CFTC report, net long positions rose to 11,891 lots October 9, up appreciably from the previous 9,014 lots, an indication that speculators become more optimistic over future copper price trend. London spot copper premiums closed higher at USD 2-6/mt Monday, and the proportion of cancelled warrants to total LME copper stocks remained high at around 22%. As such, in these optimists' views, copper prices will increase this week.