Summary: Technically, the SHFE copper 2012 contract saw shrinking volume with a relatively strong bearish atmosphere. Focus on the support at the 20-day moving average, and the short-term trend is expected to be volatile and weak. In terms of operations, it is recommended to take a bearish approach within the 51,500-52,300 yuan/ton range, with stop-losses of 300 yuan/ton on each side.
Market trends: LME copper opened lower and fluctuated on Monday. As of 15:00 Beijing time, three-month LME copper was quoted at $6,850.5/ton, down 0.37% daily. The main SHFE copper 2012 contract opened higher and moved lower, with a daily high of 52,130 yuan/ton and a low of 51,780 yuan/ton, closing at 51,810 yuan/ton, down 0.27% from the previous trading day's close. Trading volume was 83,535 lots, down 32,453 lots from the previous day; open interest was 115,180 lots, up 2,585 lots. The basis was 110 yuan/ton; the price spread between SHFE copper 2011 and 2012 contracts was -20 yuan/ton.
Market focus: (1) The global pandemic continues to spread, with new confirmed cases worldwide exceeding 450,000 again. The United States is experiencing a major outbreak in the third wave, and the epidemic in many European countries continues to worsen. (2) On October 23, copper concentrate port inventory in China stood at 445,000 tons, down 25,000 tons from the previous week; copper concentrate processing charges (TC) were $48.7/dry ton, up $0.1/dry ton weekly. (3) On October 23, the spot inventory of electrolytic copper in China's bonded areas was 416,000 tons, up 28,000 tons from the previous week, reaching a new high for the year.
Spot analysis: On October 26, SMM spot 1# electrolytic copper was quoted at 51,870-51,970 yuan/ton, with an average price of 51,920 yuan/ton, down 270 yuan/ton daily. According to Changjiang Nonferrous Metals, holders were inclined to support prices, while downstream maintained just-in-demand purchases with reduced volumes. Long-term contract demand weakened, and overall trading was subdued.
Warehouse receipt inventory: On Monday, total SHFE copper warehouse receipts were 63,944 tons, up 1,339 tons from the previous day. On October 23, LME copper inventory was 180,300 tons, down 325 tons daily, declining for the fifth consecutive day. For the week ending October 23, SHFE copper inventory stood at 155,506 tons, down 2,041 tons from the previous week.
Main positions: For the main SHFE copper 2012 contract, the top 20 longs held 76,504 lots, up 2,469 lots daily; shorts held 68,019 lots, up 1,012 lots daily; net long positions stood at 8,485 lots, up 1,457 lots daily. Both longs and shorts increased, with net longs rising.
Market judgment: On October 26, SHFE copper 2012 opened higher and closed lower. As European and American countries gradually enter winter, the COVID-19 pandemic has broken out again. Coupled with the difficulty in passing a U.S. stimulus package, market risk sentiment was suppressed and the U.S. dollar index rebounded. Meanwhile, domestic copper concentrate processing charges (TC) continued to rise slightly, showing signs of easing in copper concentrate supply. With smelters actively stocking copper concentrate, refined copper output is expected to gradually increase, putting considerable pressure on copper prices. However, the domestic economy remains stable and improving, with demand recovery expectations in the fourth quarter. Moreover, recent copper inventory has declined slightly, providing partial support for copper prices. Technically, the SHFE copper 2012 contract saw shrinking volume with a relatively strong bearish atmosphere. Focus on the support at the 20-day moving average; the short-term trend is expected to be volatile and weak. In terms of operations, it is recommended to take a bearish approach within the 51,500-52,300 yuan/ton range, with stop-losses of 300 yuan/ton on each side.