SHANGHAI, Apr 19 (SMM)—Copper prices fell before rising last week, dipping to 65,700 yuan/mt early in the week. As the US dollar index fell to 91.5, copper prices exceeded 69,000 yuan/mt.
US retail sales in March increased by 9.8% month-on-month, a record high in 10 months; the number of US initial jobless claims fell more than expected last week. Economic data reflected US economic growth. In the absence of major macro developments, the market would turn the focus to fundamentals. The signal of rapid economic recovery boosted market confidence. Net injection through domestic medium-term lending facility stood at 50 billion yuan, with a total net injection of 60 billion yuan last week by the People’s Bank of China. With the inflow of funds in the market, the cumulative increase in long positions stood at 44,000 lots in two days. However, the US dollar index remained in an upward trend amid US economic recovery, and this will pressure copper prices at high levels.
On fundamentals, smelters would undertake maintenance cycle and the backlog of inventory has eased after shipments at lower prices. But downstream consumption is not optimistic amid high copper prices. The power grid infrastructure projects have been postponed, limiting order placement. orders at automakers also declined due to the lack of chips. Consumption of other industries is not brisk. Domestic copper consumption is not promising during the traditional peak season of April-May.
Therefore, copper prices will rely more on overseas economic data and technical support in the short term. Manufacturing PMI in various countries and new home sales data in the United States will be the market focus this week. SHFE copper prices are expected to move between 66,700-69,500 yuan/mt this week and LME copper prices should trade at $8,970-9,380/mt.
Spot copper returned to big discounts last Friday. This combined with significant increase in inventories in Shanghai sidelined downstream buyers. If SHFE copper prices continue to fluctuate at a high level this week, traders will contribute to most of the trades under long-term contracts. Downstream buyers would purchase as required. This coupled with the inflows of high-quality imported copper like CCC-P brand is expected to lower spot discounts to 150 to 70 yuan/mt.