67% China Copper Producers Pessimistic over Copper Prices This Week

SHANGHAI, Jan. 12(SMM) – SMM survey indicates that 67% Chinese copper producers expect LME copper to fall below USD 4,400/mt this week and SHFE 1603 copper to drop below RMB 34,300-34,700/mt.

Market confidence still stays weak in Chinese stock market, though China halted the circuit breaker system temporarily. Expectation for reserve requirement ratio is hit again in China by poor reading of economic figures released last weekend. The 5.33% plunge in Chinese stock market on Monday dragged down copper prices gradually. SHFE copper fell below the 40-day moving average yesterday and LME copper hit a low on record since May 2009. Besides, with Chinese yuan stopping declines, the rally in SHFE/LME copper price ratio will allow SHFE copper to decline. Also, investment data slated for release this week will unlikely support copper prices.  

See SMM forecast, please click:  LME Copper to Sag Next Week

Additionally, crude oil prices are expected to head for bottom with current price at USD 30/bbl, weighing on copper prices. According to COMEX CFTC report, positions opening by speculative longs totaled 63,058 and those by speculative shorts hit 94,871 during the week ending January 5, leaving net short positions up 1,707 to 31,813, on a weekly basis, spurring bearishness in market. Besides, spot discounts in China continue expanding with imported copper flooding in domestic market despite upcoming delivery date. On the other hand, downstream buyers have not start building stocks for 2016 Chinese New Year holiday and thus downstream purchase as needed will not enough to support copper prices.

33% industrial insiders see LME copper to stabilize at USD 4,415-4,480/mt this week and SHFE 1603 copper to stabilize at RMB 34,750-35,600/mt. Attention is turning to US December’s LMCI, retail sales and PPI this week. US December’s non-farm payrolls turned out to be upbeat but this failed to push US dollar index up to 99. The LMCI should be positive but low inflation will lead to reduction in rate hike frequency by Fed. US dollar index is predicted to test support from the 60-day moving average and in short term little upside room is in sight for dollar, boding well for copper prices.

Cash crunch eases slightly in Chinese market at the beginning of 2016 but a series of pressure force the PBOC to inject liquidity into market, including large depreciation in yuan, reduction in outstanding forex and fund outflow pressure. The central bank injected a net RMB 190 billion liquidity into market last week, an 11-month high. As high as RMB 200 billion liquidity will be withdrawn from domestic market this week, boosting expectation for the PBOC to inject liquidity into market by other methods.

Positions returned above 810,000 again this week on the SHFE copper market with fierce competition between longs and shorts. 30% Chinese wire & cable producers expect copper prices to fluctuate this week. Copper prices will head for stability after continuous declines. Recently, news frequently came such as production and sales cut and stockpiling in Chinese copper market. But consumption has not picked up and many enterprises will possibly enter market when copper prices post rallies.