SHANGHAI, Jun 21 (SMM) - In the futures market, LME copper opened at $8,879/mt yesterday and rose to $8,892.5/mt after falling to $8,851/mt. At last, the prices stabilised and closed at $8,931/mt, down 0.2%. Trading volume was 13,400 lots, and open interest stood at 230,000 lots. SHFE 2207 copper contract opened at 67,990 yuan/mt in overnight trading and hovered around the daily moving average. The prices once rose to 68,700 yuan/mt after falling to 67,680 yuan/mt. At last, the prices closed at 68,390 yuan/mt, up 0.41%. Trading volume was 39,300 lots, and open interest stood at 120,000 lots.
On the macro front, (1) The president of the European Central Bank reiterated his plan to raise interest rates each in July and September, suggesting that the rate hike may be carried out at the same time as stopping asset purchases. (Bearish ☆) (2) Biden reiterated after his dialogue with former Treasury Secretary Summers that the recession in the US is not inevitable, while Summers believed that the possibility of stagflation was high, and inflation could only be curbed if the unemployment rate remained above 5% for five years. Compared with the forecast of the Fed, the actual data of the US did not perform well. (Bearish ☆)
In the spot market, (1) Shanghai: On June 20, spot premiums of copper cathode stood at 260-300 yuan/mt over the 2207 contract. The average premium was 280 yuan/mt, flat from the previous trading day. The falling futures prices aroused fear in the market, so the downstream restocking was less than expected. In addition, some participants were reluctant to restock when the premiums of copper cathode were high amid the tight imported and domestic copper cathode supply in the market outlook. Cargo holders held firm to their prices when the domestic inventory was low, and the buyers and sellers proceeded with the vehement competition. In the final delivery cycle of long-term orders this week, the short-term competition may continue.
(2) South China: On June 20, premiums of #1 copper cathode in Guangdong were 20-60 over the 2207 contract. The average premium was 40 yuan/mt, down by 5 yuan/mt from the previous trading day. Last weekend, the downstream was active in restocking because copper prices fell sharply, thus the inventory in Guangdong decreased significantly. However, the cargo holders generally held firm to the prices. In the early trading, quotes of standard-quality copper were raised to 50 yuan/mt, but the downstream was not willing to purchase, and the traders had to cut their prices to ship. After the delivery of the 2206 contract, the spread between the high-quality copper and standard-quality copper narrowed, and the spread between hydro-copper and standard-quality copper also narrowed as the hydro-copper traders held firm to the prices amid the tight supply. On the whole, the premiums dropped from high as the downstream restocking demand was not high, and the trading was general.
(3) Imported copper: On June 20, Yangshan copper premiums were quoted at $66-82/mt under warrants. The average price was $74/mt, $5/mt higher than the previous trading day, with the quotation period of July. Quotes under B/L stood at $63-78/mt. The average price was $70.5/mt, $3/mt higher than the previous trading day, with the quotation period of July. The quotation refers to the prices of goods arriving at ports in the first half of July. The premiums of LME 0-3 were $5.5/mt. The import losses were around 50 yuan/mt over the 2207 copper contract as of 10 a. m. yesterday. Import profits of spots were favourable on Monday owing to the narrow import losses over the near-month contracts and the high spot premiums of around 300 yuan/mt in China. Quotes of mainstream pyro-copper mainly moved between $80-85/mt in the early trading. Two brands of copper were quoted at $90/mt, attracting some inquiries, and the spread of affordable prices between the buyer and seller was $5-10/mt. On the bill of lading front, quotes increased along with the rising trading enthusiasm. However, the buyers did not prefer the bill of lading because of the non-immediate arrivals at ports and the worry that the domestic premiums would drop.
(4) Inventory: On June 20, LME copper inventory decreased by 1,000 mt to 117,025 mt. The copper inventory in SHFE dropped by 1,501 mt to 19,292 mt. As of June 20, SMM copper inventory across major Chinese markets decreased by 6,300 mt from last Friday to 103,600 mt.
Price Forecast: Worries of tight monetary liquidity and economic recession in Europe and the US put huge pressure on non-ferrous metals prices, and LME copper once hit a nine-month low. After the short-selling sentiment was released overnight, non-ferrous metals stopped falling and rebounded, and copper futures also rose. However, copper prices will remain rangebound at low levels in the near future owing to the cautious macro factors. LME copper will trade between $8,900-9,000/mt today; SHFE copper prices are expected to move between 68,300-68,900 yuan/mt. Spot premiums are likely to fluctuate between 200-300 yuan/mt.