SHANGHAI, Oct. 9 (SMM) – The most active SHFE 1412 copper contract started Wednesday at RMB 47,910/mt, and then surged to RMB 48,220/mt. The price of the contract later fell back to dip to RMB 47,660/mt at the tail of the trading to close down RMB 350/mt, or 0.73%, at RMB 47,690/mt. Trading volumes for the most active contract decreased by 115,000 lots, and positions gained by 9,728 lots. Trading activity was light on Wednesday.
Physical copper in Shanghai was quoted Wednesday at a RMB 0-80/mt premium to the SHFE 1410 copper contract. Traded prices were RMB 48,640-48,740/mt for standard-quality copper and RMB 48,700-48,840/mt for high-quality copper.
Quotations were mixed in early trading, with few transactions done at high prices. After SHFE copper retreated, cargo holders cut prices to boost sales, sending spot premiums down to less than RMB 100/mt. A variety of copper brands were available on the market, and most of the supply was copper imported during the Chinese National Day holiday. Downstream producers stayed essentially on the sidelines on Wednesday, leaving trading muted. Most cargo holders expect trading activity to improve on Thursday.
As SHFE copper drifted lower during the afternoon trading session, physical copper was quoted largely at a RMB 0-90/mt premium and traded at RMB 48,600-48,750/mt. Some speculative traders went bargain-hunting at the tail of the trading, boosting trading activity, but most market participants stayed on the sidelines. Cargo holders are expecting trading to improve on Thursday.
There are only three trading days this week. SMM’s latest survey shows 10% of industry insiders expect copper prices will rebound this week, basing their opinions on increasing Chinese stocks and the launch of cross border stock trading between Hong Kong and China mainland. Besides, China’s mild stimulus is beginning to produce effects, shoring up market confidence.
In China’s copper market, spot copper was offered higher than SHFE copper prices, lending support to copper prices. Downstream buyers are expected to replenish stocks after the week-long holiday, bolstering prices. As a result, these players expect LME copper to stand above USD 6,750/mt and SHFE copper to rise to RMB 48,300/mt.
70% of market players believe LME copper prices will still hover near USD 6,700/mt and SHFE copper will remain around RMB 48,000/mt, expressing their concerns over the ongoing protest in Hong Kong.
LME copper stocks during China’s National Day holiday were only 150,000 mt, down sharply from the 520,000 mt over the same period last year. The ratio of the canceled warrants also declined to 14% on October 7, compared with the about 50% a year ago. However, whether the positive market fundamentals will give strong support to prices remains to be seen. In this context, a majority of respondents foresee directionless copper prices this week.
The remaining 20% of market players are pessimistic, believing that LME copper prices will fall to USD 6,600/mt, and SHFE copper will drop to RMB 47,500/mt.
Upbeat data from the US boosted anticipation that the Fed may increase interest rate earlier than schedule, pushing up the US dollar index. Crude oil and gold prices tumbled as a result, which may presage weak copper prices.
The International Monetary Fund lowered global growth forecast, causing a decline in US shares. That, combined with strong cautions in the market, will exert a drag on copper prices.
In the euro zone, Germany’s PMI fell below 50 in September, and its manufacturing orders declined 5.7% in August, due mainly to sagging demand from China and Russia. These factors will affect global recovery, boding ill for copper prices.