SHANGHAI, Jul. 9 (SMM) – SHFE 1310 copper contract opened RMB 550/mt lower at RMB 49,130/mt on Monday, dragged down by plunging LME copper overnight. A 2.5% plunge in China’s A-shares sent SHFE copper for October delivery down to RMB 49,260/mt. Finally, SHFE 1310 copper contract finished at RMB 48,860/mt, down RMB 820/mt or 1.65%. SHFE 1311 copper contract ended the day at RMB 48,640/mt, down RMB 840/mt or 1.7%, with the high-end and low-end prices at RMB 49,100/mt and RMB 48,530/mt, respectively. Trading volumes and positions of SHFE 1310 copper contracts shrank 56,772 lots and 15,078 lots, respectively, while trading volumes and positions of SHFE 1311 copper contracts increased 151,000 lots and 44,288 lots, respectively. SHFE 1311 copper contracts became the new most active contract today. Further declines are expected in SHFE copper prices.
Spot copper in Shanghai was quoted at a discount of RMB 0-20/mt and premium of RMB 0-140/mt over SHFE 1307 copper contract prices on Monday. Traded prices for standard-quality copper were between RMB 49,440-49,660/mt, and RMB 49,540-49,840/mt for high-quality copper. SHFE copper trimmed almost 1% after a low opening, driving some speculators to buy spot copper and sell SHFE copper. High-quality copper gained favor, with premium in excess of RMB 100/mt. Suppliers of imported copper were eager to move goods now that the SHFE/LME copper price ratio has risen, widening its price gap with high-quality copper. Hydro-copper was sold more than 100/mt lower than SHFE 1307 copper contract prices. Imported standard-quality copper was quoted at a small discount near mid-day, but holders of domestic standard-quality copper still refused to sell at discount. Downstream producers became more interested in buying after copper prices dropped below RMB 50,000/mt, but were still bearish over future prices. Premiums for spot copper remained at RMB 0-120/mt in the afternoon, with traded prices at RMB 49,500-49,650/mt.
According SMM survey, 32% industry insiders are cautious to copper price trends this week, with LME copper moving around USD 6,800/mt and SHFE copper prices remaining at RMB 49,000/mt. The influence of nonfarm payrolls has yet to fade, a slew of risky events will be released this week. The release of Fed’s minutes and Bernanke’s remark is much concerned as investor expectation for the scale back of QE3 in September strengthened following the June nonfarm payroll report. Despite numerous speculations on the schedule of tapering QE3, statement of the Fed indicated that the easing policy will continue for some time. In addition, crude oil prices kept rising recently, and showed no sign of falling back along with base metals, which may help guide copper price trends. SHFE copper restored somewhat on July 8, and dip-buying on LME will increase should SHFE copper manage to hold steady, lending some support to LME copper. Moreover, with the approach of delivery date, cargo holders, especially those of high-quality copper, will keep premiums firm, which will limit downward room for copper prices. Under such conditions, these inventors expect copper prices to remain stable this week.
However, 62% of industry insiders believe copper prices will continue to fall this week, with LME copper down to USD 6,700/mt, and SHFE copper testing RMB 48,500/mt. The US dollar index has been rising lately and tends to increase further, which will continue to weigh on copper prices. In euro zone, Portugal's Minister of Foreign Affairs Paulo Portas was reappointed as Vice Prime Minister soon after resignation. Portuguese Prime Minister Pedro Passos Coelho said this is a consensus within the coalition government with an aim to avoid the premature onset of general election. Although the political crisis in Portugal seemed to have ended, investor confidence to the country’s financial market was greatly hurt. Many worried Portugal may not be able to exit from the bailout program as expected in 2014, and its banking system will be largely affected if the country starts debt restructuring following Greece. The uncertainty of Portuguese situation will continue to haunt the market. Besides, gold prices kept falling recently as investors favored the US dollar, which will influence copper price movements. CFTC report also reveals that net short positions for copper are still on the rise, showing strong bearishness in the market. In China, despite the easing liquidity crunch, money supplies will unlikely return to the level before the cash strains, so July’s loan issuance will fall. More importantly, the liquidity crunch caused banks to lower leverage and to enhance control over liquidity risks, which may also negative affect futures and stock markets. That combined with pessimistic expectation for China’s CPI and PPI data to be released this week and contraction in manufacturing, domestic stocks will remain under great pressure, dragging down the copper prices. In this context, many investors expect copper prices to extend declines this week.
The remaining 6% of investors believe copper prices will rebound this week, with LME copper returning to USD 6,900/mt and SHFE copper rising to RMB 50,000/mt. Although the US dollar index kept hitting new highs, impetus for further growth has been consumed up and copper prices were relatively resilient against the rally in US dollar. In this context, copper prices are expected to stage a rebound once the strong pressure for prices dissipated. In addition, most market players are optimistic to the US economic figures to be released this week, and copper prices may gain support once economic data turned out positive. Besides, the high canceled warrant ratio for LME copper at 55% raised expectation for market corner in LME copper, offering upward impetus for prices.