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In MB’s latest poll on future copper prices, 55% of respondents forecast that three-month copper on the London Metal Exchange will be above $8,000 per tonne by the end of this month.
But even as traders on the LME talked of the upward momentum in base metals, copper prices plunged twice last week.
Prices fell sharply on Tuesday and again on Thursday, when moves on the Shanghai Futures Exchange were so sharp and sudden that they took traders in Asia aback.
To them, for a short time, it looked like the flash crash that galvanized US equity dealers earlier this year.
The catalysts for price moves on Tuesday and Thursday were rumours out of China.
And each time, those rumours have either been denied or unsubstantiated.
On Tuesday, talk that China’s State Reserve Bureau (SRB) was selling off its inventories — market consensus is that it bought 300,000 tonnes early last year — caused prices to fall to $7,523/524 in the official session from $7,670/75 in Monday’s officials.
Then on Thursday copper futures on the Shanghai Futures Exchange lost 4% of their value in just over a minute after rumours emerged that a large position in rubber futures was being investigated by the Chinese authorities. Zinc, which is cheaper and thus more accessible to day traders, plunged even more steeply.
Market participants sold very heavily in fear the investigation would spill over into speculative positions in industrial metals.
The three-month LME contract subsequently settled at $7,560/561 per tonne from $7,634.5/635 in the previous day’s officials, a small move in the scheme of things.
Try as they might few in Asia were able to confirm the SRB was selling copper. And there was no investigation into rubber futures positions.
The rumours started in an atmosphere in which, first, there is widespread awareness that the Chinese authorities are concerned about price inflation; and, seond, that prices and the maintenance of positions are vulnerable to fiscal tightening in China.
The Chinese government was set to announce to inflation figures over the weekend, rather than on a Monday, as is customary.
This is likely because they want to give the markets a day to work out how to interpret the figures rather than selling in a panic.
Brokers at desks in Singapore, Hong Kong and Shanghai will still be strapped in tightly on Monday morning though, waiting for trading on the Shanghai Futures Exchange to open.
And if prices fall many of their clients there and on the LME may well view it as a moment to put on a long position.
“It’s typical China. We’ll probably never find out what really happened, but it’s a buy opportunity,” as one source put it late last week.