SMM Daily Review - 2011/7/22Copper Market

SHAGNHAI, Jul. 25 (SMM) –As LME copper prices closed down a day earlier, SHFE 1110 copper contract prices, the most active one, opened down RMB 360/mt at RMB 72,100/mt last Friday. In the morning session, SHFE three-month copper contract prices moved lower after a low open following the dropping LME copper prices due to a stable US dollar index, with prices meeting resistance after breaking through RMB 72,000/mt during trading hours. Coupled with a weak stocks market, SHFE three-month copper contract prices kept fluctuating around RMB 71,850/mt, down to a low level of RMB 71,720/mt. SHFE three-month copper contract prices returned above RMB 72,000/mt at the tail of trading due to large position closings. Finally, the most actively-traded copper contract prices closed at RMB 72,190/mt, down RMB 270/mt or 0.37%. Positions for the most actively-traded copper contracts were up 5,164 lots, while trading volumes were up 14,198 lots, with growingly strong resistance at the moving averages. The longs and shorts were wary of trading as SHFE copper prices fell back, and overall trading sentiment was weak.

In the spot market, copper discounts reduced to negative RMB 200-100/mt during the whole trading day, as SHFE copper prices moved lower after a low open, and since cargo-holders were reluctant to sell at lows. Traded prices for standard-quality copper were between RMB 71,400-71,500/mt, and RMB 71,450-71,600/mt for high-quality copper. Traders were forced to reduce purchases due to small profit margins from decreased copper discounts, while downstream producers made proper purchases when SHFE copper prices dropped, failing to improve overall trading sentiment. SHFE copper inventories increased by 2,585 mt to 112,046 mt in the week ending July 22th. Inventory consuming ability fell, as high spot copper prices restricted buying interest and wait-and-see mood from downstream producers kept market transactions weak.