22% China Copper Smelters Bullish towards Copper Prices This Week, SMM Survey

SHANGHAI, Apr. 6 (SMM) – About 22% Chinese copper smelters expect LME copper to grow to USD 4,850-4,900/mt this week and SHFE 1606 copper to break through RMB 37,000/mt.

See SMM Price Forecast, Please Click：LME Copper to Underperform SHFE Copper Next Week SMM Says

US March non-farm payrolls and ISM manufacturing index beat forecast and US stocks finished with gains, waning pressure from falling crude oil prices. Loose monetary policies will continue in China for the second quarter of this year and the construction of a large patch of projects listed in the 13th Five-Year Plan will gradually start. China’s manufacturing PMI released last week came in at 50.2, above 50 for the first time since last August. Chinese shares stabilize at 3,000 and will head for gains in April.

Additionally, dovish tone of speeches delivered by Yellen dampens US dollar and thus pressure from dollar will gradually weaken for commodity prices. Spot discounts in China shrink to RMB 50-100/mt and April belongs to the traditional peak demand season. Average operating rate at Chinese wire & cable producers should be 80.73% in April. Downstream producers are in process of recovery in near term and buying interest at lows still remains. Hence, improved trading will grow demand for copper. The SHFE/LME copper price ration continues falling after 2016 Chinese New Year holiday, leading to declines in imports in domestic market. SHFE copper inventories dropped 26,000 mt within two weeks and are expected to fall further in April.  

33% respondents see LME copper to slip to USD 4,700-4,750/mt this week and SHFE 1606 copper to drop below RMB 36,500/mt. Oil producer Saudi Arabia is unwilling to perform output freeze plan alone and Iran also planned to increase its oil production until to the level of 4 million bbl per day. This will pose pressure on international oil prices.

As of March 29, Comex copper net short positions totaled 4,426 with notable decline in long positions. Also, SHFE front-month contracts started outperforming forward-month contracts, fueling bearish outlook towards copper prices. Shanghai announced tightening measures on home purchases last week as widely expected, containing demand in property market. And new home starts also slowed noticeably and this will weigh on demand for copper in the future.

The remaining 45% investors believe that LME copper will hover between USD 4,750-4,830/mt this week and SHFE 1606 copper will fluctuate between RMB 36,500-37,000/mt. Mounting copper inventories on SHFE started falling last week but the high inventories will remain as a negative factor for copper prices. Nonferrous metals are less sensitive to gains in ferrous metal market. Markets expect US rate hike to be 1-2 times, but this gives little support to dollar due to Yellen’s dovish statement. Both shorts and longs exit from SHFE copper market. Technically, LME and SHFE copper finds support at the 60-day moving average and this leaves little downside room for copper prices.