SHANGHAI, Apr. 9 (SMM) –Weak LME copper prices during the Chinese Qingming holiday caused SHFE 1308 copper contract to open RMB 330/mt lower at RMB 53,990/mt on Monday. After its opening, the most active SHFE copper contract climbed on rising Shanghai Composite Index, but met resistance at the 5-day moving average. In the afternoon, SHFE copper for August delivery touched a high of RMB 54,620/mt due to position liquidation, and finally settled up RMB 270/m or 0.5% at RMB 54,590/mt. Trading volumes and positions of SHFE 1308 copper contracts decreased 30,552 lots and 430 lots, respectively. Total trading volumes and positions contracted 129,000 lots and 8,572 lots, respectively. It remains to be seen whether SHFE copper will extend gains.
Spot copper in Shanghai was quoted at a premium of RMB 160-260/mt over SHFE 1304 copper contract prices on Monday. Traded prices for standard-quality copper were between RMB 54,600-54,720/mt, and RMB 54,640-54,820/mt for high-quality copper. The most active SHFE copper contract was resilient, allowing cargo holders to hold back from selling at lows. Growing premium of imported copper, combined with dwindling spot copper supply, pushed spot copper premium all the way up. Some traders entered the market in the morning, while downstream producers purchased to need at low prices. High-quality copper remained the most popular. Premium should remain high, though few transactions were concluded after premiums rose to more than RMB 250/mt. Overall trading was brisk. Traded prices rose to RMB 54,750-54,900/mt in the afternoon.
SMM survey shows that 30% market players believe copper prices will rebound this week, with LME copper returning to USD 7,530/mt and SHFE copper standing above RMB 55,000/mt. Market players are paying less attention to the European debt crisis, leaving less pressure on copper prices. The US dollar index was dragged down by the negative US economic data, given support to copper prices. Furthermore, proportion for canceled warrant of LME copper rose above 25% despite increasing LME copper inventories, which will help improve spot copper market. In China’s premiums for imported copper have been rising recently, driving up quotations for domestic spot copper. Besides, high prices for scrap copper caused some enterprises to purchase refined copper instead of scrap copper. Plus the eased financial pressure and improved orders for downstream enterprises in early April, premiums for spot copper are expected to remain high, which will lend some support to SHFE copper prices. Thus, copper prices may rise further.
15% industry insiders expect copper prices to fall further, with LME copper expected to drop below USD 7,400/mt and SHFE copper expected to test RMB 53,800/mt. The US nonfarm payrolls hit a 9-month low in March, lower than expected, negatively affecting base metal markets. In this context, crude oil prices slipped for several trading days, offering guides for commodity prices. CFTC reported that net positions continued to increase to 20,187 lots as of the week ended March 26, with bearishness towards copper price trends. China’s domestic markets remained weak after the Qingming Festival with domestic stock markets starting lower, combined with the large amount of unlocked stocks in the first trading week after Qingming Festival which will influence futures market, SHFE copper prices will be weighed on. Thus, these investors expect copper prices to fall this week.
The remaining 55% industry insiders expect copper prices to keep vacillating this week, with LME copper hovering near USD 7,450/mt and SHFE copper around RMB 54,500/mt. The weak US economic data kept US equities at high level during Qingming Festival. The US retail sales and import price will be released this week, but market will be quiet in terms of economic news, leaving little impetus for US equities to rise further, and resistance at moving averages will leave downside risk for US equities. Technical indicators also showed copper prices are under downward pressure. Meanwhile, investors intend to sell at high prices through short-term runs, limiting the moving range for copper prices. In China, most copper smelters will complete their maintenance operations in April and recover full production, which will push up domestic copper output and make up the gap of imported copper supply. Thus, increase in premiums for spot copper will be limited. As such, copper prices are expected to remain stable this week.