25% Chinese Investors See Copper Prices to Rise This Week, SMM Survey

SHANGHAI, May 4 (SMM) – SMM survey finds that 25% Chinese copper producers believe that LME copper will break through USD 5,000/mt this week and SHFE 1607 copper will grow above RMB 38,000/mt.

US dollar index falls back to near 92 and US economy shows signs of slowdown at present. Economic figures from US are negative recently. The final April Markit manufacturing PMI was 50.8, a new low since December 2009. Weakening of dollar will support copper prices. Besides, Chinese stock market reports gains recently, boosting bullishness in market. A RMB 760 million funds flowed into nonferrous metal market on Tuesday.

CFTC report reveals that net short positions for Comex copper came in at 8,076 as of the week ending April 26, posting big week-on-week falls. SHFE copper inventories have slid for 6 consecutive weeks and dropped approximately 20,000 mt last week. LME copper inventories slipped 1,225 mt to 149,500 mt. The falling SHFE/LME copper price ratio also leads to fewer inflows of imports, and this helps ease domestic supply pressure. Spot discounts in China may narrow further heading into May with positive price gap between SHFE front-month and forward-month contract. Spot discounts shrink to RMB 80-120/mt from RMB 120-180/mt early last week.

40% investors expect copper prices to fluctuate at current levels this week with LME copper around USD 4,910-5,000/mt and SHFE 1607 copper around RMB 37,300-38,000/mt. China’s official PMI was 50.1, down 0.1 on the monthly basis but still in the expansion territory. Market liquidity heads for stability with the PBOC slightly adjust monetary policies in face of easing economic slowdown pressure.

LME copper inventories increased over 5,000 mt unexpectedly, mainly in Asian regions. Copper production in Peru jumped 45.7% to 188,000 mt, versus a rise of 3% to 489,000 mt in Chile. TCs for copper concentrate were up to USD 92.1/mt on April 29, above USD 82.4/mt early April and hitting year’s best. Technical indicators are mixed.

The remaining 35% respondents are bearish towards copper prices and they see LME copper to fall below the 40-day moving average and SHFE 1607 copper to slip below RMB 37,300/mt. Crude oil prices picked up since April and surged over 5% last week. But crude oil prices face technical downside correction and may find support at USD 42/bbl. This will weigh on copper prices. Commodity futures exchanges in Dalian, Shanghai and Zhengzhou have taken measures to control speculative trading activities, which cools bullishness in market. US non-farm payrolls will likely to be upbeat and this will send up US dollar index.