SMM Copper Market Daily Review (2015-8-17)

SHANGHAI, Aug. 18 (SMM) – SHFE copper moved lower to test RMB 38,930/mt and in the afternoon business regained some losses. Later, the red metal fell again and ended at RMB 39,150/mt, down by RMB 270/mt or 0.68%。Trading volumes grew 104 lots while positions dropped 18,018.

In Shanghai market, spot copper quoted RMB 0-60/mt higher than SHFE 1508 copper on Monday. Traded prices were RMB 39,170-39,230/mt for standard-quality copper and RMB 39,200 -39,270/mt for high-quality copper.

Falling SHFE copper prices further sent SHFE/LME copper price ratio down. Price gap between SHFE 1508 and 1509 copper grew and thus most cargo holders gave their offers for SHFE 1509 copper. On the last trading day for SHFE 1508 copper, traders hunted for cheap goods. Wait-and-see posture loomed downstream market, leaving trades softening.

31% market players expect LME copper to break above USD 5,200/mt this week and SHFE copper to grow to RMB 39,700/mt. Influence of depreciation of Chinese yuan has faded away and China Securities Finance Corp announced that it will withdraw funds from stock market gradually, meaning that China stock market has stabilized. Hence, market sentiment will be strengthened and Chinese stocks are likely to break through 4,300. Thus, copper market will gain impetus from the higher Chinese shares.

43% respondents see LME copper to hover between USD 5,100-5,200/mt this week and spot copper to range between RMB 38,800-39,500/mt. Gold and crude oil prices are mixed. Technically, LME copper falls below near-day moving averages but SHFE copper breaks above the 10 and 20-day moving averages, which should limit both upward and downward room for the red metal.

In China’s spot market, copper supply stays abundant as previous copper imports have not been absorbed. Spot premiums appear after the delivery of SHFE 1508 copper and cargo holders will remain active. As a result, copper prices should move in a tight range this week.

The remaining 26% industrial insiders note that LME copper should fall below USD 5,080/mt and spot copper will test RMB 38,500/mt. Chinese yuan tends to stabilize. The US dollar index extended rising momentum and finished last Friday at 96.65. The euro met resistance at 1.12 and is expected to weaken further.

The timing of US Fed’ interest rate hike and US economic data directly decide whether US dollar can go up further. US Fed’ meeting this Thursday should be closely watched. As such, strong dollar may depress copper prices.

Additionally, SHFE/LME copper price ratio is predicted to fall back with Chinese currency heading for stability, which will push SHFE copper prices down. LME copper prices will thus also be weighed down.