SHANGHAI, Aug. 15 (SMM) – SMM survey shows 33% Chinese copper smelters see LME copper to fall below USD 4,750/mt this week and SHFE 1610 copper to drop below RMB 37,000/mt.
China’s economic figures for July were disappointing and housing loans played an important role in new RMB loans with low consumption and business loans. Chinese economic growth depends largely on infrastructure construction and investment in property market, which however, will be hard to sustain domestic economic development for a long term due to inactive housing enterprises and SOEs.
The latest CFTC report indicated that net short positions of Comex copper was 5,187 as of the week ending August 9 and net lo9ng positions of LME copper also dropped considerably. Zinc and nickel slid from highs and copper may follow them to drop. SMM survey showed that domestic smelters maintained 89% operating rates due to sufficient concentrate supply and higher TCs. SHFE copper stocks rose 9,324 mt last week and LME copper stocks grew 4,775 mt today. As of the week ending August 12, Comex copper stocks increased 558 mt. This will pose pressure on copper prices.
54% investors expect LME copper to stabilize at USD 4,750-4,800/mt this week and SHFE 1610 copper at RMB 37,000-37,500/mt. US dollar index should maintain fluctuating at current levels in the short term. Downstream demand is not that poor in the off-season and air-conditioner sectors recover in summer, which boosts demand for copper tubes/pipes, strips and foils. But SMM learns that some SOEs and central enterprises report cash strain problem and meet troubles in financing.
Copper concentrate supply is abundant and TCs stay high. Smelters nearby Hangzhou will shut down for a short period for the upcoming G20 Summit in Hangzhou and several domestic smelters will conduct maintenance. Copper production will thus drop to the June’s low level in August. Technical side is mixed for both LME and SHFE copper.
The rest 13% market players predict that LME copper will break through USD 4,800/mt this week and SHFE 1610 copper will grow above RMB 37,500/mt. Market expectation for supply-side reform and infrastructure construction in H1 still exists despite recent weak economic figures from China. The fund scale of national and local level is estimated to exceed RMB 700 billion.
Expectation for fresh monetary policies grows in market. SSE Composite Index hit a 7-month high today due largely to low rate and expectation for loose cash. The OPEC announced to hold meeting in September, which triggers expectation for oil output freeze. Saudi’s oil minister noted measures will be adopted when necessary and Russia’s Energy Minister will discuss with other oil producers about how to stabilize oil market. This sends crude oil up above USD 45/bbl and crude oil may move higher for the near future with positive technical indicators, which will bolster copper prices.
