SHANGHAI, Sept. 1 (SMM) –LME market was closed on Monday but COMEX copper dropped quickly. SHFE 1511 copper dropped RMB 300/mt after the open of Monday trading session and then hovered around RMB 39,280/mt. China’s A-shares finally grew above 3,200 again and thus SHFE copper returned to RMB 39,450/mt before ending at RMB 39,310/mt, down RMB 80/mt or 0.20%. Positions decreased 8,722 to 148,800 and positions also declined 126,000 lots.
Spot copper quoted at discounts of RMB 30-70/mt against SHFE 1509 copper in Shanghai on Monday. Traded prices were RMB 39,220-39,300/mt for standard-quality copper and RMB 38,240-39,320/mt for high-quality copper.
SHFE copper retreated earlier gains. Monday is the last trading day of this month and hence market turned quieter. Spot copper maintained slight discounts and trades weakened marginally.
SMM survey shows that 55% market players see copper prices to hover in current ranges this week. Without guidance from LME market, investors will stay cautious. SHFE copper meets resistance at RMB 40,000/mt and meanwhile finds support at many moving averages. Additionally, news, including growing hope for US Fed’s interest rate hike and expectation for China’s PMI hitting a new low, has been absorbed by market. As such, LME copper will fluctuate between USD 5,050-5,150/mt this week and SHFE copper should range between RMB 38,800-39,500/mt.
15% industrial insiders are bullish towards copper prices and they expect LME copper to test USD 5,200/mt and SHFE copper to move stable around RMB 39,800/mt this week. Strong expectation for a turnaround of demand in Sept. and Oct. will support copper prices. Also, China will employ lots of pro-growth measures with a slowdown in China’s economy this year. Long vacations fall since this week in China and wary sentiment will lend support to base metals.
What’s more, production cut on Beijing’s parade has already impacted iron ore and rebar and this may boost base metal prices. Total positions of COMEX copper are 166,991 and net short positions decline to a month-low as shorts book profits. As a result, copper prices should be set for rise this week.
The remaining 30% note that SMM copper will fall to USD 5,000/mt and SHFE copper test support at RMB 39,000/mt this week. A slowdown in China’s economy and volatile global stock market negatively impact market sentiment. China’s A-shares are predicted to fall back from a high of 3,200. This may bode ill for base metals. Chinese Premier Li Keqiang said there’s no basis for continued depreciation of the yuan following its devaluation on Aug. 11. The high SHFE/LME copper price ratio should stage corrections after reaching a high level. Thus, with LME copper staying weak, SHFE copper may easily drop. Many processing enterprises hold negative outlook towards orders in Sept and believe that demand will not turn better. Chinese smelters conducted maintenance frequently before and hence they may increase production later. Soft demand and rising supply will depress copper prices.