SHANGHAI, Nov. 26 (SMM) – Rising LME copper helped SHFE 1402 copper contract open RMB 460/mt higher at RMB 50,990/mt on Monday. The contract fell back after a brief touch of RMB 51,020/mt due to selloffs, and went all the way down to RMB 50,480/mt in the afternoon before closing the day RMB 30/mt or 0.06% lower at RMB 50,500/mt. Trading volumes were off 2,604 lots, while positions increased 9,674 lots. Market caution will preclude any appreciable uptick in the red metal for the near term.
Spot copper in Shanghai was quoted at a premium of RMB 90-180/mt over SHFE 1312 copper contract on Monday. Traded prices were RMB 51,020-51,100/mt for standard-quality copper, and RMB 51,080-51,160/mt for high-quality copper. Cargo holders were anxious to sell for cash, causing premium to narrow. Traders were wary of stepping in, with some buying spot copper while selling SHFE copper. Downstream producers watched from the sidelines at the beginning of the week. In the afternoon, supply increased, causing premium to narrow. Spot copper was offered at a premium of RMB 80-170/mt over SHFE current-month copper contracts. Traded prices edged lower to RMB 50,950-51,070/mt. Suppliers became even more anxious to sell later in the day, with Jinchuan copper quoted at a premium of RMB 120/mt.
61% of market participants surveyed by SMM expect LME copper to move in a USD 7,000-7,080/mt price band and SHFE 1402 copper contract to fluctuate between RMB 50,400-50,900/mt this coming week. 1. US housing and employment data were upbeat, but consumer confidence index was disappointing. Mixed economic data will keep investors on guard. Meanwhile, markets will stay cautious ahead of more US economic figures due this coming week, holding copper prices in check. 2. On the technical side, LME copper will face strong resistance. 3. More investors will pull out of the market as the month-end liquidity crunch is biting in, precluding any rise in SHFE copper. 4. The Shanghai Composite Index will encounter strong resistance at 2,200 points, also keeping a lid on SHFE copper. 5. Short sellers will also close positions, lending support to the low-end SHFE copper price.
Another 21% of market players are bearish that LME copper will retreat below USD 7,000/mt and that SHFE 1402 copper contract will be vulnerable at RMB 50,300/mt. 1. Net short positions surged to 33,898 lots in the week ending November 19, the highest level since early March, a sign of growing downward pressure on SHFE copper prices. 2. Smelters will continue to liquidate inventories against the year-end capital strains, compounding oversupply pressure. 3. Tightening cash will erode downstream producers’ buying interest, exacerbating pressure from oversupply.
The remaining 18% believe that LME copper will climb above USD 7,100/mt and that SHFE 1402 copper contract will regain RMB 51,000/mt mark. 1. Germany’s Finance Minister said last Saturday that the euro zone is facing no systematic risks. Greek Prime Minister emphasized that Greece needs no further aid. These facts indicate that economic problems in euro zone members are being solved smoothly. In this context, the euro rose and is expected to extend gains this week. A stronger euro will help copper prices rebound. 2. Investors will continue to bet that the US Federal Reserve will keep QE3 in place for now, offering upward impetus to US stock markets. US shares will rise further after Eclectica CEO Hugh Hendry reverses its pessimism over US stocks, thus lifting copper prices. 3. LME copper inventories have dropped 28,500 mt so far this month, with the proportion of cancelled warrants remaining high at above 60%. SHFE copper inventories also fell 18,791 mt, injecting rising momentum to copper prices.