40% Chinese Copper Smelters Bearish towards Copper Prices This Week, SMM Survey

SHANGHAI, Jun. 14 (SMM) – SMM survey shows that 40% Chinese copper producers expect LME copper to fall below USD 4,500/mt this week and SHFE 1608 copper to drop below RMB 35,000/mt.

LME Lead to Outperform SHFE Lead Next Week, SMM predicts

China’s CPI issued last week grew 2% YoY, below forecast, while PPI slid 2.8% YoY. Private fixed asset investment was up 3.9% YTD through May with growth slowing to a all-time low. Investment in domestic property market grew 7% on the nominal basis with growth 0.2 percentage point below January-April. The rural fixed asset investment increased 9.6% during January-May with growth slowing to a 16-year low. Value-added at Chinese above-scale industrial enterprises was steady in May but the retail sales and other investment data was poor. This reflects that Chinese economy is still looking for ground.

Economic figure from US released during China’s Dragon Boat Festival was upbeat, including  US initial jobless claims and University of Michigan’s CCI. This drove up US dollar to 94.75. The Brexit fuels risk aversion in market, boding ill for bond and euro. This will also support US dollar. As of June 7, net short positions for Comex copper was 39,294, up 467 on the weekly basis. LME copper inventories grew 57,000 mt to 210,675 mt last week, up by 37%, mainly due to inventory surge in Asian regions. Technical indicators are also negative.

20% market players see LME copper to break through USD 4,590/mt this week and SHFE 1608 copper to grow above RMB 35,500/mt. Commodity prices was strong on Monday, including agricultural products, precious metals and ferrous metals. This made shorts exit from SHFE copper market on Monday. The unwrought copper and copper semis imports was 430,000 mt in China in May, falling 4.4% from 450,000 mt in April. This helps easing supply pressure in domestic market. Average operating rate at Chinese copper rod wire producers was 79.6% in May, up 8.5% YoY and 3.5% MoM, based on SMM latest survey. This was mainly because one large copper rod producer in Jiangsu grew output by 8,000 mt. Spot premiums in China remained high since last week and quoted at RMB 90-140/mt on Monday. SHFE copper inventories dropped 28,657 mt to 182,338 mt announced on June 8. The SHFE/LME copper price ratio once hit 7.75 on Monday and import copper premiums also head for gains.

The rest 40% industrial insiders predict that LME copper will fluctuate around USD 4,550/mt this week and SHFE 1608 copper will move between RMB 35,000-35,500/mt. US Fed, the Bank of England and he Bank of Japan will hold rate meeting this week and market will thus keep wary. Technical indicators for both LME and SHFE copper are mixed. As such, copper prices should remain at current levels this week.