SMM Copper Market Daily Review (2015-6-1)

SHANGHAI, Jun. 2 (SMM) – The August-delivery SHFE copper moved around RMB 43,720/mt early on Monday and closed down RMB 510/mt at RMB 43,650/mt. SHFE 1508 copper contract positions increased 12,390 and trading volumes grew 62,648 lots. Technical resistance enhanced.

Spot copper was quoted at premiums of RMB 30-90/mt to SHFE 1506 copper contract in Shanghai Monday morning. Traded prices were RMB 43,890-43,930/mt for standard-quality copper and RMB 43,910-43,990/mt for high-quality copper.

Although cargo holders offered high prices, ample supply and poor trades caused spot premiums to narrow. Prices of hydro-copper and standard-quality copper refused to decline due to tight supply. Downstream buyers only watched from the sidelines and traders bought on dips.

SMM’s most recent survey indicates that 48% of industry participants expect copper prices to move sideways this week, with LME copper at USD 6,020-6,100/mt and SHFE copper at RMB 43,700-44,200/mt. These respondents expect the US dollar index to consolidate with the US nonfarm payroll data due out this week. Besides, market may be cautious before release of China, US and euro zone PMIs. Although Monday’s stock market rally will help shore up market, a lack of trading will continue to curb copper price movements.

41% of industry insiders see LME copper to fall to USD 6,000/mt and SHFE copper down below RMB 43,500/mt, arguing that technical indicators are pointing to stronger resistance. In addition, the relatively weak demand will prevent copper prices from rising. SMM survey also shows that operating rates among downstream producers varied largely by size of companies.

The remaining 11% of the surveyed expect a technical rebound this week which will send LME copper above USD 6,120/mt and SHFE copper to RMB 44,200/mt. These respondents noted that falling copper inventories reported by both LME and SHFE will bolster copper prices. Besides, sufficient liquidity will help enliven copper trades. In spot markets, cargo holders are unwilling to sell at lows, and the spot premiums will bode well for copper prices as well.