SHANGHAI, Aug. 30 (SMM) – SMM survey indicates that 24% Chinese copper smelters see LME copper to break through the 5-day moving average this week and SHFE 1610 copper to grow above RMB 36,600/mt.
Global central banks released signals of easing policies at the annual meeting of global central bankers. The Bank of Japan Governor said that fresh stimulus measures will be taken immediately if necessary. ECB also said that it will increase stimulus should other countries’ central banks stay quiet.
Profits at Chinese above-scale industrial enterprises rose 6.9% YoY during January-July with growth quickening 0.7 percentage point from January-June. The figure was up 11% in July with growth above 5.9 percentage points from June and the second highest for the year. Commodity prices posted rallies and profits for nonferrous metal industries were positive. This may boost copper prices. Chinese yuan struggled around 6.69 on August 29, hitting a 1-month low and the SHFE/LME copper price ratio grew to 7.84 with SHFE copper outperforming LME copper. Market expectation for the high-demand season in September and October will increase.
52% investors expect LME copper to remain at USD 4,620-4,670/mt this week and SHFE 1610 copper at RMB 36,200-36,600/mt. Longs continued entering crude oil market while shorts exiting. CFTC report showed that speculative short positions of WTI crude oil futures and options reduce 66,247 or by 41%, a new high since 2006 while long positions grew to the year’s high. Net long positions rose 118 million bbl in the week ending August 8. Crude oil should hover between USD 46-48/bbl in the short term with major oil producers failing to reach agreements on output freeze. The PBOC injected net cash of RMB 310 billion last week and injected another RMB 31.5 billion net cash to market on Monday. The overnight Shibor was up 0.5% to 2.0490 on Monday.
Markets will keep cautious before the release of US nonfarm payroll report. Spot goods maintain premiums while downstream buyers watch from the sidelines due to cash strain at month’s end and disrupted transport in south China, affected by the G20 Summit in Hangzhou. This will curb growth in spot premiums. Technical side is also mixed for copper prices.
The remaining 24% respondents predict that LME copper will drop to USD 4,600/mt this week and SHFE 1610 copper will fall below RMB 36,000/mt. Market expectation for a rate hike in September was boosted by Yellen’s speech and US dollar index rose to 95.54. The stronger dollar will damp copper prices. LME copper inventories jumped over 50,000 mt last week and net short positions of COMEX copper were up 1,592 to 6,666 in the week ending August 23. Downstream purchase does not grow despite falling copper prices and demand is slightly negatively affected by the G20 Summit. Technical indicators are also negative for copper prices.