SHANGHAI, Jul. 30 (SMM) – SHFE 1311 copper contract opened RMB 940/mt lower at RMB 49,200/mt on Monday. The most active contract moved all the way down to RMB 48,920/mt due to selloff and a 1.8% plunge in China’s A-shares. Finally, SHFE copper for November delivery finished at RMB 49,100/mt, down RMB 1,140/mt or 2.27%. Trading volumes decreased by 2,498 lots, but positions increased by 14,486 lots. Shorts again predominated the market.
Spot copper in Shanghai was quoted at a premium of RMB 120-350/mt over SHFE 1308 copper contract prices on Monday. Traded prices for standard-quality copper were between RMB 49,800-50,000/mt, and RMB 49,950-50,150/mt for high-quality copper. Although SHFE 1311 copper contract prices fell by over RMB 1,000/mt, spot copper premium grew. Prices of high-quality copper were more than RMB 200/mt higher than those of standard-quality copper. Middlemen entered the market for purchasing and downstream producers became more willing to buy once copper prices fell below RMB 50,000/mt, improving overall trading. Premiums dropped slightly to RMB 120-330/mt in the afternoon, and traded prices remained little changed, but transactions fell.
SMM survey shows that half of market players believe copper prices will fall this week, with LME copper expected to drop below USD 6,800/mt and SHFE copper to slip below RMB 48,500/mt. China’s latest industrial data were reported weak and lower than expectation, combined with the report on elimination of outdated capacity, China’s weak demand will become a major driver of selloffs. In addition, the official China manufacturing PMI and the final HSBC China PMI will be released this week, with market expectation not optimistic. Crude oil and gold, which may give guide to copper prices, also showed pullback. In addition, the latest CFTC report indicated net short position increased as of July 23, and technical indicators also presaged price decline. The selling pressure caused by the shift of most active SHFE copper contract expected will leave market predominated by shorts, and the A shares falling below 2,000 will also weigh down base metals markets. Thus, copper prices are expected to extend declines.
31% of market players expect LME copper prices to remain around USD 6,850/mt and SHFE copper still at RMB 49,000-49,200/mt. Market expects no significant changes after the Fed’s July 30-31 policy meeting, so the US dollar index may remain at a current level, but base metals will gain limited support. The slump in copper prices in China left investors quite cautious, narrowing the range for price movements. On the other hand, seven-day repo rates in interbank markets started at 5.00% on Monday, much higher than the 3.94% last Monday, an indication of tightening interbank liquidity at month’s end and that a slew of problems within banking system remained unresolved. The combination of these factors lead some believe copper prices will remain in a narrow range this week.
Nonetheless, 19% of investors are still optimistic, noting that LME copper will stand above USD 6,900/mt and SHFE copper will challenge the resistance at RMB 49,800/mt. The US economic figures were reported mixed, but employment remained positive, leaving market upbeat to the nonfarm payrolls to be released this week. This may help boost the US equities and lend support to copper prices. In Europe, the stabilizing political conditions will help alleviate market concerns. In China, with copper prices falling below RMB 50,000/mt, some downstream consumers and traders started making inquiries, driving up premiums for spot copper.