SMM Daily Review - 2011/7/1 Copper Market

SHAGNHAI, Jul. 4 (SMM) –SHFE 1109 copper contract prices, the most active one, opened up RMB 320/mt at RMB 69,700/mt on Friday, with prices moving higher during the whole trading day. SHFE three-month copper contract prices were pushed up to a high level of RMB 69,870/mt reached on Thursday, as the shorts left the market after a high open in the morning session, but then fell back to fluctuate narrowly around RMB 69,600/mt. In the afternoon session, SHFE three-month copper contract prices tried to reach RMB 70,000/mt following rising LME copper prices due to a drop in the US dollar index, climbing as high as RMB 70,040/mt. At the tail of trading, SHFE three-month copper contract prices narrowed previous gains due to large-scale position closings. Finally, SHFE 1109 copper contract prices closed at RMB 69,880/mt, up RMB 500/mt or 0.72%. Positions for SHFE 1109 copper contracts were up 3,422 lots, while trading volumes were down 61,018 lots. The buying interest of the longs increased during the whole trading day, but the resistance at RMB 70,000/mt was still strong. Hence, SHFE three-month copper contract prices were expected to fluctuate continuously around RMB 70,000/mt.        

In the spot market, today was the first trading day in July, and SHFE copper prices continued to move higher after a high open. Some traders were forced to reduce sales due to hedging. The SHFE/LME copper price ratio fell, dampening imported copper cargo-holder’s interest in moving goods, and reducing market supply as a result. In this context, spot copper discounts narrowed the declines compared to Thursday, to discounts of negative RMB 250-120/mt. Traded prices for standard-quality copper were between RMB 69,700-69,800/mt, and between RMB 69,750-69,950/mt for high-quality copper. Friday was the first trading day after the change of month, and cash flow pressures were still available, causing downstream consumers to be more cautious towards RMB 70,000/mt. However, some traders were still interested in buying given the large discounts, and speculative activities improved compared to the previous two trading days. SHFE copper prices continued to climb above RMB 70,000/mt in the afternoon session, and cargo-holders were positive towards premiums in the upcoming week, leading spot copper supply to decrease sharply. In response, spot copper discounts fell further to negative RMB 120-100/mt. Traded prices were above RMB 70,000/mt, with prices between RMB 70,000-70,100/mt. SHFE announced copper inventories increased 9,297 mt to 90,089 mt in the week ending July 1st, suggesting low consumption due to cash flow pressures at the month-end and also signaling ample imported copper supply. With the release of cash flow pressures in next week, spot copper discounts were expected to change.    

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