SHANGHAI, Oct. 14 (SMM) – The most active SHFE 1412 copper contract dipped to RMB 46,950/mt during last Friday’s night session after starting at RMB 47,140/mt. The price of the contract rebounded subsequently to close up RMB 220/mt at RMB 47,810/mt. During the night session, trading volumes for the SHFE 1412 copper contract rose to some 260,000 lots, but positions fell by 23,908 lots. Positions for the SHFE 1501 copper contract added by 12,246 lots.
On Monday, SHFE copper initially tested resistance at the RMB 48,000/mt mark after China’s trade data beat forecasts, but fell to RMB 47,850/mt afterwards to end up RMB 260/mt, or 0.55%, at RMB 47,850/mt. Trading volumes for the SHFE 1412 copper contract decreased by 20,572 lots, and positions dropped by 41,542 lots.
Physical copper in Shanghai was quoted Monday between a RMB 40/mt discount and a RMB 120/mt premium to the SHFE 1410 copper contract. Traded prices were RMB 48,500-48,600/mt for standard-quality copper and RMB 48,570-48,750/mt for high-quality copper.
As SHFE copper leveled off, the price gap between the 1410 and 1411 copper contracts remained at around RMB 300/mt. Cargo holders intended to push up premiums early on Monday, but buyers considered prices too high. Large quantities of imported copper flocked to the market after the SHFE/LME copper price ratio improved. In response, physical copper was largely quoted between a RMB 40/mt discount and a RMB 70/mt premium by the midday, with standard-quality copper sold quoted at a discount and hydro-copper at a RMB 80-90/mt discount. Middlemen and downstream producers were cautious in trading on Monday, and pressure from rising supply grew.
As SHFE copper hovered narrowly during the afternoon trading session, the price gap between the SHFE 1410 and 1411 copper contracts remained big. Physical copper was mostly quoted between a RMB 120/mt discount and a RMB 30/mt premium, and traded at RMB 48,480-48,650/mt during the session.
SMM’s latest survey shows 8% of market players are optimistic about copper price outlook this week, citing positive technical indicators. These players believe LME copper prices will break above USD 6,750/mt and SHFE copper prices will stand above RMB 48,000/mt.
67% of industry insiders expect LME copper to stay between USD 6,650-6,720/mt and SHFE copper to remain at RMB 47,200-48,200/mt. Upbeat trade data from China failed to give a boost to the market, raising doubts about the sustainability of the rebound in copper market. Meanwhile, the consolidation of US dollar index will also limit moving range of copper prices. In China, the Shanghai Composite Index fluctuated wildly and came under greater pressure influenced by plunging US stocks and increasing uncertainties. These factors, combined with the relatively stable liquidity conditions, will leave copper prices in the current range.
25% of industry participants are bearish, basing their opinions on the slowdown in major economies, particularly in the euro zone. In addition, the diverged views on economic outlook and financial results of publicly traded companies, as well as deflationary pressure on major economies may also put a dent in copper prices.
In China’s physical copper market, as the price gap between SHFE 1410 and 1411 copper contracts did not narrow before the last trading day for the front-month contract, spot premiums are expected to narrow. Besides, latest data indicate a sharp rise in China’s copper imports. Thus, supply of imported copper in China’s domestic markets will grow with the SHFE/LME copper price ratio recovering. In this context, one quarter of the respondents expect LME copper to test support at USD 6,600/mt, and SHFE copper to fall to RMB 47,000/mt.