SHANGHAI, Jun. 4 (SMM) – SHFE 1309 copper contract started Monday RMB 570/mt higher at RMB 53,000/mt, bolstered by surging LME copper in the morning. The most active SHFE copper contract found its high at RMB 53,220/mt, but then sank to RMB 52,800/mt as worse-than-expected HSBC’s final China manufacturing PMI for May triggered sell-off. SHFE copper for September delivery, however, bounced back to the daily moving average at the tail of the session before closing at RMB 53,010/mt, up RMB 250/mt or 0.47%. Trading volumes and positions were down 97,698 lots and 8,246 lots, respectively. SHFE 1309 copper contract stabilized at several moving averages, and will likely rise further.
Spot copper in Shanghai was offered at a premium of RMB 100-260/mt over SHFE 1306 copper contract prices on Monday. Traded prices for standard-quality copper were between RMB 53,550-53,650/mt, and RMB 53,670-53,830/mt for high-quality copper. SHFE 1309 copper contract prices lacked upward momentum. Some traders aggressively sold off goods to generate cash in the morning, while others held offers firm. Spot copper came in many varieties and supply was plentiful, causing premium to narrow. Some middlemen bought spot copper while selling SHFE copper. Trading in spot market was muted after SHFE copper fell back, but some downstream producers purchased to need after SHFE copper stopped falling. In the afternoon, premiums for spot copper continued to narrow to RMB 70-230/mt, with traded prices down slightly to RMB 53,500-53,750/mt.
The latest SMM showed that 19% industry insiders are optimistic, expecting copper prices will rise further this week, with LME copper standing above the 60-day moving average to test USD 7,380-7,420/mt and SHFE copper challenging RMB 53,500/mt. A slew of US economic data will be released this week. The consumption and hosing data are expected to be bright, particularly non-farm payrolls which may help boost copper prices. Canceled warehouse warrant ratio for LME copper remained high at 38% and LME copper inventories began falling, which will also lend support to prices. Technical indicators also showed upward trends for copper prices. In China, injection of new capital in June will help enliven futures markets and increase volatility of copper prices. Reuters data showed that RMB 351 billion of bills and repos issued by China’s central bank will mature in June, including RMB 128 billion of bills and RMB 223 billion of repos. Bank bills worth RMB 110 billion and repos worth RMB 92 billion will mature this week (RMB 202 billion in total). In China’s spot copper markets, downstream buyers will begin replenishing goods for the Chinese Dragon Boat Festival, helping lift consumption. As such, some investors believe copper prices will continue the upward trend this week.
19% market players believe copper prices will stage a pullback this week, with LME copper down to USD 7,200/mt and SHFE copper to RMB 52,000/mt. Although the European debt crisis was not the market focus lately, the deteriorating employment placed mounting pressure on governments. Euro zone saw the highest unemployment rate of 12.2% in April. In response, some south European countries, including France, were granted a 2-year extension for achieving their 3% deficit reduction goal. This may help alleviate the pains suffered by these countries, but the economic downside was not reversed. Meanwhile, both IMF and OECD cut China’s GDP growth forecasts for 2013 and 2014, indicating unpromising prospect for China’s economy, which may depress market confidence. The increase in US equity markets was arrested by the noticeable decline last Friday. Despite the positive economic figures for US and UK released last week, both trading volumes and prices staged declines, reflecting investors’ caution and negatively affecting the US equities. Furthermore, the weak crude oil prices will also add to drags on copper prices. In spot copper markets, the large amount of copper imports arriving at China’s ports may lead to oversupply pressure in the market, combined with high selling interest among domestic cargo holders, premiums for spot copper are expected to slip further. As a result, copper prices are expected to fall back this week.
62% market players are cautious, noting that LME copper prices may still hover around USD 7,300/mt, and SHFE copper will hold steady around RMB 52,500/mt. Any economic recovery or growth at present is the result of massive easing policies, meaning that any report on tapering QE will be a blow to the markets. Although US Fed’s retreat from the QE is not confirmed, beneficiaries of the stimulus policy will start booking profits. Besides, the US dollar index shows no cleat direction, which may also limit any large swings in copper prices. In China, the amount of unlocked shares in June will see marked decrease and the present no sharp weekly changes. A-shares will experience less pressure but may test 2,300 repeatedly. In this context, most industry insiders believe copper prices will still move narrowly this week.