SHANGHAI Jan. 19 (SMM) – SMM survey indicates that 50% Chinese copper producers expect copper prices to move at current level this week with LME copper between USD 4,300-4,420/mt and SHFE 1603 copper between RMB 34,400-35,400/mt.
Positions have slipped below 730,000 on the SHFE copper market, but still remain high. This allows longs and shorts to compete with each other. Positions for SHFE 1603 copper post small changes per day and thus copper prices should move in a tight range this week. Besides, copper processors report steady orders with the upcoming Chinese New Year holiday. Depreciation in Chinese yuan leads to stronger SHFE copper than LME copper. But once the PBOC releases some measures to stop the depreciation, SHFE copper prices will fall back.
30% investors are pessimistic over copper prices and they expect LME copper to drop below USD 4,300/mt this week and SHFE 1603 copper to fall below RMB 34,350/mt. Economic figures from China due for release this week are forecast to be downbeat. A total of RMB 240 billion capital will be withdrawn from market this week. The PBOC will likely conduct some reverse purchase operations and perhaps will not cut interest rates and reserve requirement ratio this week. Also, crude oil prices extend losses, which will be worsened by the lifting sanctions against Iran’s oil exports. Crude oil prices will soon break below USD 29/bbl. During the week ending January 12, short positions of WTI crude oil futures rocketed 15% to 200,975, a new high since 2006 while net long positions slipped to a 5-year low of 9.3%. Falling crude oil prices will weigh on copper prices.
Additionally, deliverable goods flow into market after the delivery for SHFE 1601 copper and a cluster of copper imports flood into Chinese market under the high SHFE/LME copper price ratio. Both factors widen spot discounts. Downstream producers gradually start vacation and show tepid buying interest. Moreover, net short positions on COMEX totaled 42,025 and rocketed to a new high during the week ending January 12, according to CFTC report. Technically, both LME and SHFE copper meet strong resistance and lack upside strength.
20% market players see LME copper to grow to USD 4,450/mt this week and SHFE 1603 copper to break above RMB 35,500/mt. They believe that rallies are ahead for Chinese A-shares following plunges, support copper prices. Besides, copper prices should bounce back after hitting new low for several times.
