SMM Daily Review - 2011/7/29 Copper Market

SHAGNHAI, Aug. 1 (SMM) –SHFE 1110 copper contract prices, the most active one, opened RMB 270/mt higher at RMB 72,980/mt on Friday, with prices falling after initially increasing during the whole trading day. At the opening of trading in the morning, SHFE three-month copper contract prices were pushed up to RMB 73,480/mt by the longs, but then fluctuated around RMB 73,400/mt after meeting resistance. Near the midday, as LME copper prices dived, SHFE three-month copper contract prices lost RMB 73,000/mt. In the afternoon session, SHFE three-month copper contract prices basically moved below RMB 73,000/mt and touched a low level at around RMB 72,510/mt, as LME copper prices lowered to test USD 9,800/mt due to a rebound in the US dollar index, and since the Shanghai Composite Index slumped 1%. Finally, the most actively-traded copper contract prices failed to pare loses, closing at RMB 72,660/mt, down RMB 50/mt or 0.07%. Positions for SHFE 1110 copper contracts were up 3,734 lots, and trading volumes were up 46,504 lots. Market sentiment for intraday trading improved, but volumes for opening and closing positions by the longs were nearly the same due to concerns towards overnight risks. With technical support at the 5-day moving average available, SHFE three-month copper contract prices would likely move upward.

In the spot market, copper discounts increased to negative RMB 550-400/mt in the morning session as SHFE copper prices set new highs for the month, but fell to negative RMB 400-300 near the midday trading session as SHFE copper prices retreated nearly RMB 400/mt. Traded prices were still held firm at RMB 72,000/mt. Trade prices for standard-quality copper were between RMB 72,000-72,100/mt in the morning session, and RMB 72,050-72,250/mt for high-quality copper. As Friday was the last trading day before the month-end, tight cash flow problems kept chances of real transactions slim, resulting in low trading volumes. As copper prices in the SHFE market continued to slump in the afternoon session, spot copper discounts fell further to negative RMB 350-200/mt. Traded prices dropped from above RMB 72,000/mt to RMB 71,900-71,950/mt, with fewer market players making purchases. Copper inventories monitored by the Shanghai Future Exchange (SHFE) were up 5,021 mt to 117,067 mt in the week ending July 29th, as cash flow pressures at the month-end and wary sentiment over high prices caused market oversupply and increases in copper inventories.