SHANGHAI, May 10 (SMM) – SMM survey reveals that 68% Chinese copper producers see LME copper to fall below USD 4,700/mt this week and SHFE 1607 copper drop below RMB 35,600/mt.
Ferrous metals prices drop across the board in China and inventories in north China grow notably and traders thus rush to sell, which will affect nonferrous metals prices. China’s April trade data is also negative and refined copper imports slid over 20% MoM in April, fueling bearishness. SHFE copper inventories inverted to gains last week despite reduction in inbound shipments. This indicates that the high-demand season is not that strong this year and with the season coming to an end, copper prices will face downward pressure. Forward-month copper contracts outperform near-month contracts, a reflection of bearish outlook towards copper prices. Technical indicators also show downside direction for SHFE copper.
23% market players expect copper prices to move at current levels this week with LME copper around USD 4,700-4,800/mt and SHFE 1607 copper around RMB 35,800-36,800/mt. US crude oil prices fell more than 3% last week and now technical indicators are mixed. Thus, crude oil prices should also keep fluctuating at current levels.
The rest 9% respondents believe that LME copper will bounce back to USD 4,800/mt this week and SHFE 1607 copper will move above RMB 37,000/mt. US dollar index posted the largest single-week gains in 6 months last week and gained 1.39%. But soft non-farm payrolls cool expectation for rate hike and net short positions for dollar increased to a new high since February 2013. US dollar gains will not sustain. CFTC report shows that net short positions for Comex copper fell to 7,460 as of the week ending May 3. Some downstream producers enter market following plunge in copper prices and this may push up premiums, giving support to copper prices.