SHANGHAI, Jan. 4 (SMM) – LME copper prices slipped last Friday, so SHFE 1304 copper contract, the most active one, opened slightly RMB 180/mt down at RMB 57,590/mt Monday. HSBC China manufacturing PMI was reported to hit a recent high and helped the Shanghai Composite Index rebound strongly by 1.6%. In this context, the contract marched higher all the way after temporarily testing a low of RMB 57,430/mt, and reached an intraday high of RMB 58,080/mt near the midday. SHFE copper prices edged down in the afternoon, however, as investors closed positions. SHFE 1304 copper contract settled RMB 210/mt or 0.36% higher at RMB 57,860/mt, with trading volumes up 24,208 lots but positions down 6,642 lots. Total trading volumes on the SHFE added by 44,644 lots, but total positions decreased by 17,480 lots. With prices standing above all recent moving averages and technical indicators pointing up, SMM believes SHFE copper prices will rebound following the New Year holiday.
SHFE copper prices moved higher after starting down on favorable HSBC China manufacturing PMI, but most companies chose to withdraw from markets during the last trading day of 2012, causing copper supply to decrease. In this context, copper discounts narrowed sharply to negative RMB 100-250/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 56,950-57,150/mt, and RMB 57,000-57,250/mt for high-quality copper. Hedged copper was locked out of spot copper markets following copper price rebounds and helped copper discounts shrink further. Traders stood on the sidelines, while downstream producers made purchases in small quantities. Overall market transactions rose first but then decreased. In the afternoon, spot copper resources were rarely seen in the spot markets, but as copper prices fell, cargo-holders became less willing to hold firm prices, leading discounts to expand to negative RMB 170-300/mt. Traded prices were RMB 56,900-57,200/mt in the afternoon.
SMM conducted a survey with regard to copper price trend this week.
Based on the survey, 33% of market insiders believe that copper prices may challenge highs, with LME copper expected to touch USD 8,000/mt and SHFE copper to stand above RMB 58,000/mt. HSBC announced that the HSBC China manufacturing PMI hit a new 18-month top, and markets are also upbeat about PMI indexes in Europe and the US to be released this week. The financial markets will be boosted significantly, driving copper prices higher. Besides, technical indicators for both LME and SHFE copper are pointing up. Meanwhile, selling pressures should ease as market activity will remain muted during the two trading days. As such, these market insiders foresee that copper prices will continue rebounding this week.
The remaining 67% of market insiders, though, are still cautious about copper price trend this week, anticipating that LME and SHFE copper will fluctuate narrowly around USD 7,900/mt and RMB 57,500/mt, respectively, this week. The US may avoid the fiscal cliff and will not give a heavy blow to market confidence, but uncertain factors prevail. In the euro zone, German Chancellor Angela Merkel linked future German prosperity to a prosperous European Union in her new year message and urged Germans to be more patient since the European debt crisis is far from over. This indicates that market focus will again shift to the European debt crisis, which will restrict copper price trend. Moreover, the US dollar is trying to shake off resistance at recent moving averages and will impose great pressure to copper prices once breaking the 20-day moving average effectively. Gold and crude oil prices have recently struggled around their recent moving averages, providing some guidance for copper price movement. Furthermore, Shanghai spot market activity is expected to remain lackluster this week, and copper discounts will continue. In this context, these insiders anticipate that copper prices will likely stay within their previous trading range this week.