SHANGHAI, May 24 (SMM) – 31% Chinese copper smelters see LME copper to fall below USD 4,550/mt this week and SHFE 1607 lead to drop below RMB 35,000/mt.
US dollar index should grow further as markets expect May PMI and April home sales to be upbeat. Technical indicators show downward trends for crude oil prices, which will drive down copper prices. TCs increased to USD 93-99/mt last week and TCs have entered upward track since February. This pushes up production at smelters. Traditional high-demand season gradually comes to end in China. Weak fundamentals will impose pressure on copper prices. SMM survey reveals that orders for processors head for losses heading into May. Copper processors are still unwilling to build stocks in spite of low copper prices.
Technical indicators are also negative. Net short positions for Comex copper totaled 30,646 as of the week ending May 17, up 7,820 on the weekly basis. Declines extend in ferrous metal market, fueling bearishness.
63% industrial insiders expect copper prices to remain in current levels this week with LME copper between USD 4,550-4,600/mt and SHFE 1607 copper between RMB 35,000-35,600/mt. The PBOC conducted RMB 300 billion reverse repurchase agreement last week with net injection of RMB 50 billion. And the bank conducted RMB 290 billion in MLF. On May 23, the bank conducted RMB 65 billion reverse repurchase agreement with net injection of RMB 20 billion. On SHFE market, near-month copper contracts outperform forward-month contracts and this means that support exists for near-month contracts and spot copper prices. Positions for LME copper maintain at 340,000 at present and positions of all SHFE copper contracts are 770,000. This reflects that both longs and longs give more favor to forward-month contracts, which shows low speculative willingness in market.
The rest 6% market players anticipate that LME copper will break through USD 4,600/mt this week and SHFE 1607 copper will break through the 10-day moving average. Inventories on three exchanges, namely SHFE, LME and Comex, dropped 31,474 mt last week, including a fall of 28,876 mt on SHFE, of 1,400 mt on LME and of 1,198 mt on COMEX. Losses narrow for imported copper, a reflection of support from downstream demand. Refined copper imports slid 25.4% MoM to 340,000 mt in China, easing domestic supply pressure. Spot discounts invert to premiums rapidly after the delivery of SHFE 1605 copper last week, boosting market confidence.