SHANGHAI, Feb. 26 (SMM) –China's central government again exert control over housing markets, while China's central bank injected capital into markets for the first time in over eight months, which caused the Shanghai Composite Index to plunge by 4.4% and test 2,300. SHFE copper prices followed LME copper down below all recent moving averages last Thursday and touched a low of RMB 57,220/mt. However, SHFE copper still proved more resistant to declines compared to LME copper, helping the SHFE/LME copper price ratio rise. 

In spot markets last week, copper premiums were reported at around RMB 100/mt during the first trading day after the Chinese New Year holiday, which was the delivery day for SHFE 1302 copper contracts, but premiums turned to large discounts the following day. Hedged copper flew into spot markets as SHFE copper prices fell sharply, but imported copper continued to arrive at ports, increasing spot copper supply pressure. Copper discounts thus failed to shrink as market pessimism was growing. Speculators were wary of entering markets, but actual downstream producers began making purchases following the Lantern Festival. In this context, overall spot copper supply significantly exceeded demand during the week.

SHFE copper prices will also drift lower in the coming week and test support at RMB 56,500/mt. SHFE copper, however, will continue to show more resilience than LME copper, helping improve the SHFE/LME copper price ratio.