64% Market Players in China Optimistic over Copper Prices This Week, SMM Survey

SHANGHAI, Mar. 1 (SMM) - SMM survey shows that 64% of China copper producers are optimistic over copper prices this week and they see LME copper to grow above USD 4,700/mt and SHFE 1604 copper to return above RMB 36,500/mt.

See SMM Price Forecast, Please Click:LME Copper to Consolidate at Highs This Coming Week

US dollar index faces pressure after returning above 98 with waning expectation for rate hike, boding well for base metals prices. Besides, a series of loose policies will come on stream in March. The PBOC announced to cut reserve requirement ratio by 0.5 percentage point effective from March 1, 2016. The NPC & CPPCC is around the corner, fueling the case for additional pro-growth measures. Supply pressure will likely be eased by continuous reduction in copper imports and domestic smelters still hold back sales. Also, expectation for pick-up in demand is strong and cargo holders are unwilling to sell at lower prices. Operating rates at domestic copper producers improve from the same period last year after the 2016 Chinese New Year holiday, SMM survey reveals. Growth in orders also show signs of coming peak demand season. The CFTC reports suggest that speculative shorts for COMEX copper futures fall sharply by 5,577 to 2,095 during the week ending February 23, a new low since early November 2015.

25% respondents expect copper prices to fluctuate in current range this week with LME copper between USD 4,600-4,670/mt and SHFE 1604 copper between RMB 35,800-36,400/mt. Markets strongly expect the coming peak demand season and more pro-growth measures in China in March. In spite of domestic hot property market, Chinese A-shares plunge and investors show weak confidence. Base metals will be lacking in momentum to go up or down. Downstream buyers do not build stock as expected even after Chinese Lantern Festival on February 22 and only small producers hoard a small number of stocks. Moreover, loss-making of imported copper continue widening and thus in short term, imports will not bring about heavy inventory pressure in domestic market.   

The remaining 10% market players note that LME copper will fall below USD 4,600/mt this week and SHFE 1604 copper will slip below RMB 35,600/mt. Chinese spot market recovers slightly after Chinese New Year holiday but little buying interest is seen. SHFE copper inventories hit a new high since 1999 with copper and copper concentrate imports up in January. This means that domestic smelters’ efforts to raise spot prices will be unlike through holding back sales. Recent copper prices rally is contributed by policies in domestic property market and overall commodity sentiment. Once Chinese economy fails to pick up and demand fails to improve, downside room will be left for copper prices. Technically, longs exit market at highs after SHFE copper recently bounced back to the high posted since December 2015 and technical indicators also show signs of downturn.