20% China Copper Smelters See Copper Prices to Grow This Week, SMM Survey

SHANGHAI, Jun. 7 (SMM) – SMM survey reveals that 20% Chinese copper smelters expect LME copper to grow to USD 4,750-4,800/mt this week and SHFE 1608 copper to up to RMB 36,300-36,750/mt.

US nonfarm payrolls released last Friday came in at 38,000, much below expectation, which cut bets for rate hike in June. US dollar index thus fell by 1.5% to a low of 93.85 seen last Wednesday. This will boost copper prices. Recently, wire & cable producers see big gains in orders and average operating rate at the producers hit 85.83% in May, up 6.35 percentage points MoM. With upcoming traditional peak demand season for power, orders from the Sate Grid will increase modestly. Also, the on-grid power tariff dropped RMB 0.02-0.04/kwh after PV station connected to power grid since June 30, which led to marked rise in orders at large wire & cable producers.    

SHFE copper inventories slid 10,217 mt last week, the further large drop in 4 weeks, and fell by 43% in total in Q2 with declines expanding. Comex copper inventories decreased to 59,820 mt. Spot premiums in Shanghai maintained at RMB 100-120/mt on Monday despite SHFE copper up by RMB 840/mt. This reflects that cargo holders’ strong willingness to hold offers firm. There will be only three trading days this week for China’s Dragon Boat Festival and downstream buyers may build stocks for the holiday. CFTC report shows that net short positions on Comex copper market was 38,827 as of the week ending May 31, up 2,226. Ferrous metals prices led base metals prices to rebound on Monday and may continue bouncing back in the future. Technical indicators for LME and SHFE copper are also positive.

60% market players reckon that copper prices will remain in current levels this week with LME copper around USD 4,670-4,750/mt and SHFE 1608 copper between RMB 35,800-36,300/mt. US dollar posted losses last week and should fluctuate at lows this week with major reports absent this week. Crude oil was the weakest last Friday and will fluctuate around USD 50/bbl this week after no oil output freeze deal was made on the OPEC meeting last week. Technical indicators also give no clear direction.

The Remaining 20% industrial insiders see LME copper to fall below USD 4,670/mt this week and SHFE 1608 copper to drop below RMB 35,800/mt. China’s manufacturing figures issued last week are not positive and this indicates that Chinese economy is still looking for ground. China’s money supply growth will slow down in the middle of this year and this will tighten liquidity at enterprises. Both SHFE and LME copper lacks rising momentum after respectively hitting RMB 36,300/mt and USD 4,750/mt. LME copper inventories surged 20,725 mt on Monday LME canceled warrants dropped to 28.64%. Besides, rally in TCs will boost Chinese smelters’ producing interest while the traditional low-demand season is nearing, which will lead to oversupply in domestic market.