SMM Copper Market Daily Review (2015-11-2)

SHANGHAI, Nov. 3 (SMM) – SHFE 1601 copper once lurched lower to RMB 38,320/mt on Monday but later rebounded as China’s Caixin PMI returned to 48.3, to close at RMB 38,500/mt, down RMB 180/mt or 0.47%. Positions were up 14,770 to 241,114 and trading volumes were around 187,000 lots.

In Shanghai, spot copper traded at discounts of RMB 10-60/mt on Monday, versus RMB 38,500-38,600/mt for standard-quality copper and RMB 38,520-38,640/mt for high-quality copper.

Transactions were mainly done at lower prices and mainstream prices quoted at discounts of RMB 10-60/mt. In the afternoon business, spot discounts widened to RMB 20-80/mt with traded prices at RMB 38,520-38,650/mt. Traders hunted for cheaper goods in market and downstream producers watched from the sidelines.

54% market players see SHFE copper to fall below RMB 38,200/mt this week. Markets will focus on interest rate decision by the Bank of England (BOE) and US nonfarm payrolls. US dollar falls slightly recently but finds support at moving average. Strong dollar will weigh down base metals.

Oil transportation fees slide to a 13-month low, boding ill for crude oil prices. And according to CFTC report, net short positions grew almost three times more than net long positions, igniting bearishness in market. Copper mines, expected to cut production previously, are still expanding capacity, depressing copper prices.

35% respondents expect LME copper to range between USD 5,080-5,120/mt this week and SHFE 1601 copper to move between RMB 38,200-38,800/mt. Market sentiments stays cautious in the first week during November. Likelihood of further slump in Chinese stock market decreases. China’s Caixin manufacturing PMI rebounded from lows, mirroring that domestic economy heads for stability. And strong expectation for reform and investment in infrastructure will help stabilize copper prices. Average operating rate at domestic processing enterprises also stabilizes.

The rest 11% are optimistic towards copper prices and they note that LME copper will return above USD 5,120/mt this week and SHFE copper will grow above RMB 38,800/mt. The People’s Bank of China (PBOC) injected RMB 105.5 billion liquidity into 11 financial institutions via mid-term lending facility (MLF) in October. And market expects more information after China's 5th plenary session of the 18th CPC Central Committee. Poor reading of US economic figures will delay US Fed’s interest rate hike, curbing US dollar. This will support copper prices.