SMM Copper Market Daily Review (2015-4-7)

SHANGHAI, Apr. 8 (SMM) – SHFE 1506 copper contract started at RMB 43,300/mt on Tuesday, and climbed quickly as the weak nonfarm payroll data released last week weighed down the US dollar index. The most active SHFE copper then moved between the 5 and 10-day moving averages, and suffered selling pressure at RMB 43,560/mt. In the afternoon, the red metal finished at RMB 43,480/mt, up RMB 150/mt, or 0.35%.

Positions in the most active contract increased 3,848, and trading volumes declined 157,000 lots.

Spot copper in Shanghai market quoted at premiums of RMB 0-40/mt to SHFE 1504 copper contract Tuesday morning, with standard-quality copper trading at RMB 43,530-43,570/mt and high-quality copper selling for RMB 43,560-43,640/mt.

Cargo holders offered spot premiums at RMB 50/mt early today, but transactions were rarely made. A few hydro-copper offered at discounts of RMB 20-30/mt were soon consumed. Thus, some sellers lowered premiums to RMB 40/mt. Prices of different brands were close to each other, leaving little room for bargaining.

With regards to copper prices this week, 32% of industry insiders are bullish that LME copper is heading towards USD 6,100/mt and SHFE copper will break above the 10-day moving average. Recovering China PMI data and a pullback in the US dollar index, as well as the rallying crude oil will lend support to base metals. The People’s Bank of China conducted RMB 20 billion of seven-day reverse repos on Tuesday, with auction rate of 3.45%, down by 10 basis points. Sufficient liquidity will encourage investment.

In addition, the CFTC reported a decline in net short positions in COMEX copper to 4,154 for the week ending March 31. LME’s report also indicated an increase in long positions to 31,076 for the week ending March 27, reflecting stronger bullish mood in copper market. Besides, the lower SHFE/LME copper price ratio will lead to a decline in imported copper supply, while Chinese copper smelters were reluctant to sell. Thus, spot premiums were reported from Shanghai market.

28% of the surveyed expect LME copper to fall to USD 5,890-5,950/mt and SHFE copper to drop below RMB 43,000/mt, citing anemic consumption. Wire & cable bids from the State Power declined from a year ago, and copper semis production recovered slowly after the Chinese New Year, presaging poorer copper demand from power sector.

SHFE reported a 3,064 mt growth in copper stocks to 246,656 mt. Meanwhile China’s new measures to boost housing demand may have little impact on housing construction, reflected by the continued falls in rebar and iron ore prices.

Moreover, the US dollar is expected to remain strong for the long run, which plus the persistently high crude oil inventories, will pressure copper prices.

The remaining 40% of industry insiders believe that copper prices will move sideways this week, with LME copper staying between USD 5,950-6,080/mt and SHFE copper trading at RMB 43,000-43,700/mt.

Trading volumes of SHFE copper declined to less than 220,000 lots Tuesday, but positions held up at around 810,000 and LME copper positions also remained at 380,000. High long and short positions will leave copper prices in the current moving range. Technically, resistance has formed at the 5 and 10-day moving averages, but support at the 20-day moving average is solid.

In spot copper market, both sellers and buyers were cautious. Besides, although the US dollar index dropped, its impact on copper prices has been receding lately. These, combined with the absence of important economic releases this week, may leave copper prices directionless.