SHANGHAI, Jul. 23 (SMM) – SHFE 1311 copper contract opened RMB 160/mt higher at RMB 50,100/mt on Monday. The most active contract hovered near the daily moving average as longs and shorts mostly closed positions, with the low-end price at RMB 49,900/mt. SHFE copper for November delivery rose in the afternoon, but met resistance at RMB 50,400/mt. Finally, the most actively traded SHFE copper contract closed at RMB 50,350/mt, up RMB 410/mt or 0.82%. Trading volumes shrank by 47,366 lots and positions decreased by 17,208 lots.
Spot copper in Shanghai was offered at a premium of RMB 180-440/mt over SHFE 1308 copper contract prices on Monday. Traded prices for standard-quality copper were between RMB 50,750-50,920/mt, and RMB 50,920-51,150/mt for high-quality copper. Rising SHFE copper prices allowed spot copper suppliers to raise spot premium. The price gap between standard-quality copper and high-quality copper remained large as high-quality copper gained favor from middlemen. Downstream producers, however, continued to buy only on an as-needed basis. In the afternoon, premiums for spot copper slipped to RMB 170-370/mt, and traded prices were RMB 50,900-51,150/mt.
According to SMM survey, 43% of market players believe LME copper prices will stand above USD 7,000/mt and SHFE copper prices will break through RMB 50,500/mt this week. Market is optimistic to the US housing data will be released this week, which will help drive up the US equities and give a boost to copper prices. Despite little substantial progress, the G20 meeting concluded on July 20 leads investors to believe that the G20 nations, especially euro zone countries, are moving to a good direction. As a result, the euro is expected to strengthen while the US dollar may be weighted down, lending support to copper prices. Meanwhile, gold and crude oil also staged a strong trend recently, with gold returning to USD 1,300/oz. In China’s spot markets, as price gap between the SHFE current month and three-month copper contracts fell below RMB 500/mt, some speculators continued to purchase high-quality copper, driving up premiums for spot copper. In this context, some investors expect SHFE copper prices will challenge higher levels this week.
46% of market players expect LME copper to hover at USD 6,870-6,990/mt and SHFE copper to move around RMB 50,000/mt. Technically, supports for the LME and SHFE copper were strong, but LME copper prices will be difficult to break through the resistance at USD 7,000/mt. In China’s money markets, loosening measures are not expected with the liquidity tightness easing noticeably, but chances for tightening cash flow are also slim given the lower funds outstanding for foreign exchange and handover of fiscal deposit. As such, stock and futures markets are expected to hold steady. In spot copper markets, although premiums are high at present, downstream consumption will weaken due to the upcoming low demand season, which will send premiums down. Thus, these market players believe copper prices will remain at the current levels this week.
The remaining 11% industrial insiders are more pessimistic, noting that LME copper prices may fall below USD 6,860/mt and SHFE copper prices will test support at RMB 49,300/mt this week. As of July 19, according to CFTC report, net short positions for copper remained above 20,000 lots, indicating a continued bearish mood to copper prices. In addition, market is not optimistic to the PMI figures to be released this week, particularly the HSBC PMI for China. Once these data turn out weaker than expected, financial markets, including China’s stocks markets, will be largely hit. Hence, copper prices will also be dragged down. Meanwhile, market players expect spot copper prices will no show significant change in low demand season. As such, copper prices are expected to seek support at lower prices.