SMM Research: Chinese 8-day Holiday, “Sneak Attack” or “Rest” of London Copper?

Published: Sep 28, 2017 10:37 (GMT+8)

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SMM exclusive interview: Prospect of LME copper price during Chinese National Day holiday

SHANGHAI, Sept. 28 (SMM)－According to SMM’s survey of domestic insiders, 32% participants keep neutral on copper price (Based on price of LME three-month futures copper at 16:35 Sept.27, $6559.5 per tonne within+-2%) ; 47% participants keep bullish on copper price (rise over 2%); 21% participants keep bearish on copper price for short time (drop over 2%).

SMM exclusive interview: Prospect of LME copper price during Chinese National Day holiday

Xu Maili, Guangda Metals Institute: Some existing contradictions in foreign market: Firstly, US index witnesses indication of stability and rebound. Once rebound is confirmed, previous congested bulls of funds in US copper will need covering, which is bad news for copper price, Secondly, technically London copper approaches the 60-day moving average, showing obvious technical support. Overall it tends to be volatile in a weak way, but domestic copper price remains strong during recent days, so it may offset influence of foreign markets’ fluctuation after the long holiday to some extent.

Zhang Huawei, Dongwu Futures: Currently see a bearish copper price.

1. Since Sept. 22^nd, a new round of real estate control has been implemented following Sept.30^th last year. The pulling function of real estate market and infrastructure investment to copper price has been weakening gradually.

2. Environmental protection is still in a grim situation now. After the supply-side reform and DE-capacity raises prices of multiple industrial products to high point of past 4 years, the market shifts its focus to demand side because the downstream and end consumers reduce production due to stress of environmental protection.

3. FED announced to shrink its balance sheet. Standard & Poor's lowers sovereign rating of China, which makes market get frustrated for short term and hedging emotion increases.

4. Concerning fundamentals of copper, influence of continuous supply interruption during the first six months of the year has been weakening. Mines supply achieves a recovery growth. Copper concentrate spot TC will keep rising, The demand side is bearish with shrinkage of real estate market and decline of grid investment growth.

5. Substantial supply for LME spot, which shows huge premium against March electronics.

Copper price is also supported by some factors:

1. Global manufacturing industry is still in expansion. With rising inflationary pressure, domestic economy keeps overall stable so the downward space of copper price is limited.

2. Demand is relatively strong during domestic consumption peak season. Generally speaking, London Copper may keep stable and weak during Chinese national day holiday.

Luo Liang, Shanghai CIFCO Futures: London Copper is expected to be hard to recover greatly during Chinese national day holiday, mainly because domestic import trade will be under restrictions, especially for the letter of credit associated with banks which will almost cease at that time. Also discount of London copper has been enlarging recently. It is very likely that futures move towards spot.

Liu Peng, Luzheng Futures: Personally speaking, the price tendency of London copper is bearish during Chinese national day holiday. Firstly demand in China is not as high as anticipation, Despite some growth, it is hard to support the price’s continuous rise. Secondly, factories in China will close for national day holiday so demand will reduce, while the supply side will not demand less greatly. Mine fields that affected by strike tend to produce at full capacity, which is seemly willing to complement previous missing output. Another question is, premiums and discounts of domestic spot keeps rising for this week, even over 200. With great growth of processing charges, fees of copper bars rally to over 1000. Despite bullish opinions of market, according to the survey of some copper bars trading companies and cable plants, it is hard for companies to accept premiums and processing fees at such a high level. Despite previous stock, the demand is still under anticipation. Conduction seems a big problem in games among traders.

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