SMM Copper Market Daily Review (2015-8-24)

SHANGHAI, Aug. 25 (SMM) – LME copper started with a negative gap on Monday. This, combined with the plunge of 9% in China stock market, weighed SHFE copper to RMB 37,650/mt. Later, Chinese stocks stopped falling and thus drop in SHFE copper also slowed, to close the day at RMB 38,280/mt, down RMB 740/mt or 1.9%. Trading volumes of SHFE 1510

copper were up 336,000 lots and positions jumped 11,796. Trading volumes of SHFE 1511 copper grew 190,000 lots and positions rose 16,936.

On Monday, spot copper traded between discounts of RMB 50/mt and premiums of RMB 40/mt in Shanghai. Mainstream prices were RMB 38,180-39,180/mt for standard-quality copper and RMB 39,150-38,580/mt for high-quality copper.

Asian and Pacific stocks dropped across the board. SHFE copper prices lost for near RMB 1,000/mt. A large amount of copper imports flowed into market. Some cargo holders cut their price offers to excite trades. Price gap between different brand copper widened above RMB 50/mt with sufficient supply in market. Speculators still bought spot copper and sold copper futures while wait-and-see sentiment loomed downstream market. Bearishness grew in the whole market.

Global stocks and SHFE copper slumped on Monday and thus few market players are bullish towards copper prices this week.

SMM survey shows that 56% industrial insiders expect LME copper to slip to USD 4,800/mt and SHFE copper to fall to RMB 37,300/mt this week. China’s A-shares tumbled and lots of stock index futures dropped to daily limit on Monday. The Shanghai Composite Index broke below 3,200. As such, some companies employed some rescuing measures, but this failed to comfort investors in short time. Some investors closed their positions or directly exited market after some shares reopened gain following hitting daily upside limit. US, South Korea and Thailand stocks all hit a fresh low. China’s economy slowdown, together with the tumble in Chinese stock market, will not lend support to copper prices.

Currency depreciation in China and other Asian counties and growing hope for US Fed’s interest rate hike in September further weaken investors’ confidence. Crude oil futures extend losses due to near 0.1 billion bbl of oversupply. US crude oil declined to the lowest since February 23, 2009 and Brent oil futures also saw the lowest since March 16, 2009. But gold prices rallied, mirroring weak confidence in investors.

In China’s spot market, traders rush to sell for cashes late August and spot discounts will not disappear with inflow of copper imports. LME copper already fell to a six-year low while SHFE copper performed better. Hence, SHFE/LME copper price ratio stays high but this leaves room open for shorts to sell off SHFE copper. Technically, both LME and SHFE copper fall below near-day moving averages, boding ill for copper prices.

The rest 44% investors see LME copper to hover around USD 5,000/mt and SHFE copper around RMB 38,000/mt this week. US dollar index posted the largest single-week drop during latest two months. This week will see US durable goods orders and GDP number. Should those figures turn out to be upbeat, dollar will be supported. Markets expect a stable economy growth to boost the case for interest rate raise in September. However, China’s soft data, slipping commodity prices and US low inflation will slow the pace for the rate hike. Longs of US dollar exit market, data released by CFTC reveled. As such, copper prices should fluctuate this week.