SHANGHAI, Jun. 28 (SMM) – 38% Chinese copper smelters expect LME copper to fall below USD 4,650/mt this week and SHFE 1608 copper to drop below RMB 36,000/mt.
UK’s leave decision pushed down pound to a 30-year low and capitals flow into safe-haven asset market. US dollar index once grew to 96.703 and still sees rising momentum in the short run. Heading into June, downstream demand turns weak and orders fall at copper rod and pipe/tube producers. TCs quote at USD 100-105/mt at present and the CSPT set the lowest acceptable TCs at USD 103/mt for Q3. There is still upward room for clean concentrate TCs, which will boost smelters’ producing interest. This will grow supply in market. Technical side also show signs of declines.
38% industrial insiders believe that copper prices will remain at current levels this week with LME copper at USD 4,650-4,750/mt and SHFE 1608 copper between RMB 36,000-36,800/mt. Net inject by the PBOC hit RMB 340 billion, a 2-month high. And the central bank injected RMB 100 billion net cash on Monday. US dollar is expected to maintain at highs this week with eyes on US economic figures. Crude oil currently find support at the 60-day moving average and should head for stability this week. Technical indicators are mixed for LME copper while SHFE copper may fall back slightly with exit of shorts.
24% market players point out that LME copper will grow above USD 4,750/mt this week. The UK’s leave vote may slow the rate hike pace by US Fed. Merrill Lynch lowered forecast for US economic growth by 0.2 percentage point following the UK’s leave decision. Both the University of Michigan’s CCI and durable goods orders released recently fell short of anticipation, which almost erases the possibility of rate hike in July. Thus, US dollar will likely fall back from highs. The central parity rate of the Chinese yuan against US dollar slipped below 6.63 on June 27, recording a new low since October 23, 2010. This pushes a large number of capitals to commodity market.
Losses suffered by copper imports expand to above RMB 400/mt and domestic smelters start maintenance cycle. Also, SHFE copper stocks dropped over 10,000 mt last week. As such, supply pressure is light in domestic market. The capacity elimination strengthens further in steel industries and depreciation of Chinese yuan grows costs for iron ore imports, which will cut supply in China. Iron ore and rebar futures contract hit daily upward limit. This will boost commodity prices. CFTC report reveals that new short positions for Comex copper was 32,926 as of the week ending June 21 with short positions slipping 19,406. UK’s leave vote will attack overseas demand in the near future, which will negatively affect China’s exports. This will drag down China’s GDP growth and thus markets expect China to cut reserve requirement ratio and interest rates after June.