SMM Copper Market Daily Review (2015-10-26)

SHANGHAI, Oct. 27 (SMM) – SHFE 1512 copper opened at RMB 39,600/mt last Friday night with LME copper falling from highs and drifted lower to RMB 38,800/mt, to end at RMB 39,020/mt, down RMB 470/mt or 1.19%. Positions dropped 7,004 to 226,794 and trading volumes were around 360,850 lots.

SHFE copper met resistance at RMB 39,120/mt on Monday and once shot up to RMB 39,670/mt, to close at RMB 39,060/mt, down RMB 430/mt or 1.09%. Positions declined 12,082 to 221,716 and trading volumes were around 660,000 lots. Positions of SHFE 1601 nickel grew 11,492 to 169,264.

In Shanghai, spot copper trade between discounts of RMB 60/mt and premiums of RMB 20/mt over SHFE 1511 copper on Monday. Traded prices were mainly RMB 39,050-39,120/mt for standard-quality copper and RMB 39,100-39,170/mt for high-quality copper.

Traders returned to market and spot supply grew. Cargo holders quoted between discounts of RMB 40/mt and premiums of RMB 20/mt in the morning. But this was not accepted by traders and downstream buyers. In the second trading session, spot copper prices were offered between discounts of RMB 60/mt and premiums of RMB 10/mt. Downstream buyers stayed out of market and spot discounts are likely to widen further.

38% industrial insiders expect LME copper to fall below USD 5,100/mt this week and SHFE 1512 copper to slip to RMB 38,800/mt. US dollar posts large growth recently and will gradually be consolidated at highs, depressing copper prices. Average operating rate at copper semis producers should stay low in October and do not show signs of real improvement. On the other hand, downstream consumption, except in cable sector, is still on the decrease, citing in air-condition, household appliance and auto sectors. However, cable producers will increase production considerably in 2016.

23% investors see LME copper to grow above USD 5,250/mt this week and SHFE 1512 copper to return to RMB 39,800/mt. China’s GDP in Q3 fell bow 7 for the first time, boosting case for pro-growth measures. China announced to cut interest rate and RRR last Friday, triggering expectation for global momentary easing. This will support commodity prices. Long-term anemic copper prices lead to production cut at lots of foreign mines and expansion project stop in China. Supply and demand imbalance will improve. LME copper inventories extended losses and already fell to 277,600 mt, supporting LME copper prices.

The rest 39% market players believe that LME copper will fluctuate between USD 5,150-5,250/mt this week and SHFE copper will range between RMB 38,800-39,800/mt. US dollar and crude oil prices range between moving averages. Chinese stocks continually grow but meanwhile meet strong resistance. And commodity prices also hover. Besides, positions opened by longs and shorts post small changes, CFTC report shows. Both LME and SHFE copper finds support at the 60-day moving average and meanwhile meet resistance at the 10-day moving average. In China’s spot market, cargo holders do not rush to sell late October, leaving spot discounts and premiums into a standstill.