SMM Price Outlook for Base Metals on SHFE (Aug. 4, 2017)

[SMM Shanghai Spot Copper] Intraday, the SHFE copper nearby-to-next-month backwardation remained at a relatively high level of 570-600 yuan/mt. Combined with persistently tight availability of cargoes in east China, Shanghai spot copper premiums stayed high. According to SMM's communication with the market, mainstream quotations for standard-quality copper cargoes with invoices dated next month were basically at premiums of 550 yuan/mt or above, and suppliers had limited willingness to sell at low prices. Downstream enterprises showed relatively limited acceptance of the current high premiums; some chose to postpone purchases and wait for premiums to pull back before restocking, with intraday purchases mainly need-based.

Last Friday evening, LME copper opened at $14,351.5/mt, touched a high of $14,383/mt in early trading, then drifted lower all the way and dipped to $14,214.5/mt near the close. It subsequently drifted higher and settled at $14,285/mt, down 0.15%. Trading volume reached 16,900 lots, and open interest reached 270,000 lots, down 215 lots from the previous trading day, as bulls trimmed positions. Last Friday evening, the most-traded SHFE copper contract opened at 109,200 yuan/mt. It rose to 109,300 yuan/mt amid wild swings in early trading, after which the price center moved straight down to touch a low of 108,150 yuan/mt, before settling at 108,570 yuan/mt, down 0.05%. Trading volume reached 58,000 lots, and open interest reached 215,000 lots, down 1,422 lots from the previous trading day, as bulls trimmed positions.