Copper prices to remain in downward trend this week

SHANGHAI, Jul 13 (SMM) — The People's Bank of China decided to lower the deposit reserve ratio of financial institutions by 0.5 percentage point on July 15, 2021. The full release of domestic liquidity boosted short-term market bullish sentiment, pushing up LME copper prices by $200/mt. However, the possibility of an earlier reduction in bond purchase by the Fed has strengthened market expectations of tighter liquidity. In addition, the market expects that US employment data will pick up significantly after August. A potential higher US dollar index will prevent copper prices from rising in the long term.

SHANGHAI, Jul 13 (SMM) – CPI data of European countries and the US, as well as domestic GDP data for the second quarter will be a market focus this week.

On fundamentals, large volumes of dip purchases have lowered domestic inventory significantly. But in the medium and long term, most of the smelters have sufficient copper scrap stocks even as some domestic smelters will stand Maintenance. Affected output is expected to stand at 18,000 mt. With the continuous recovery of TC and high prices of sulphuric acid, smelters should maintain high production in the third quarter. This combined with the off-season will lead to oversupply. This will accumulate domestic inventories, limiting gains in copper prices.

SHFE copper prices are expected to move between 67,300-70,200/mt this week, and LME copper will trade between $9,230-9,600/mt.

The market focus is on the price spread between the SHFE front month and next month contracts. The contango stood between 100-150 yuan/mt last week, sidelining arbitrage traders. Some market participants believe that the price spread will expand, strengthening spot quotes. Warrants decreased over 5,000 mt, reflecting tighter supply. This should bolster spot quotes.  Spot premiums are expected to move between 180-250 yuan/mt.