SMM Copper Market Morning Review (2015-9-11)

SHANGHAI, Sept. 11 (SMM) – LME copper moved in a tight range of USD 5,360-5,400/mt during European and US trading hours and closed at USD 5,392/mt, edging up USD 36/mt.

US initial jobless claims decreased to 275,000 during the week ending Sept. 5. But import and export prices in Aug. posted a largest drop in 7 months, curtaining inflation in US. Overnight, investors turned optimistic on the outlook for copper demand in China and they believed that global copper supply will tighten.

LME copper grew above the 60-day moving average overnight but SHFE copper was slow to rise. SHFE 1511 copper started slightly lower at RMB 40,990/mt during Thursday evening session but then drifted higher to RMB 41,280/mt in response to LME copper and crude oil prices. The contract finally ended the session at RMB 41,030/mt, up RMB 80/mt. Positions declined 3,288 to 227,552 with trading volumes around 270,000 lots.

China’s PPI dropped at a faster pace in Aug. but CPI increased, fueling expectation for additional pro-growth measures. Offshore yuan appreciated noticeably during Asian trading hours, easing worries about persisting depreciation in yuan. The SHFE/LME copper price ratio fell back. LME copper is likely to outperform SHFE copper in future.

LME copper should consolidate the support at the 60-day moving average and move in USD 5,350-5,400/mt during Asian trading hours. However, SHFE 1511 copper may underperform LME copper to range between RMB 40,800-41,300/mt on Sept. 11. Spot copper in China should trade at discounts of RMB 30-80/mt against SHFE 1509 copper. Widening price gap between SHFE 1509 and 1510 copper weakened traders’ willingness to hold offers firm.