SMM Daily Review - 2011/8/12 Copper Market

SHANGHAI, Aug. 15 (SMM) –As LME copper prices overnight rallied stably, SHFE 1110 copper contract prices, the most active one, opened up RMB 630/mt at RMB 67,200/mt on Monday. Despite directly jumping above the 5-day moving average, SHFE three-month copper contract prices moved lower in the afternoon business, losing the five-day moving average of RMB 66,900/mt and falling to a low at RMB 66,330/mt, as LME copper prices moved lower after a high open and lost USD 8,900/mt due to a slightly higher US dollar during the trading day, and since the Shanghai Composite Index struggled around 2,600 points after a high open and became especially weak in the afternoon. Finally, SHFE 1110 copper contract prices closed at a recent low level of RMB 66,460/mt, down RMB 110/mt or 0.17%, losing the previous daily gains. Positions and trading volumes for SHFE 1110 copper contracts were down 712 lots and 171,000 lots, respectively, while positions for SHFE 1111 copper contracts were up 7,086 lots. The shorts actively built new positions during the whole trading day, dominating the market again. Hence, market panic sentiment remained.   

In spot market, despite a slight rebound in SHFE copper prices, as Friday was the last trading day before the delivery date, copper discounts fell significantly compared to the previous trading day. Copper offers were initially quoted at discounts of negative RMB 100-0/mt in the morning business, but offers for some high-quality copper were reported between discounts of negative RMB 50/mt and premiums of positive RMB 40/mt, since SHFE current-month copper contract prices fall back near the midday. Trade prices for standard-quality copper were between RMB 67,080-67,150/mt in the morning business, and RMB 67,150-67,250/mt for high-quality copper. Slight discounts for high-quality copper in the morning session prompted some speculators to buy, while downstream producers increased purchases given continuous rebound in SHFE copper prices, resulting in brisk market transactions. SHFE copper prices dropped in the afternoon session, and spot offers all turned into premiums. Traded prices fell between RMB 67,000-67,200/mt, and market transactions were obviously hampered. The Shanghai Future Exchange (SHFE) announced copper inventories increased by 2,619 mt to 120,819 mt in the week ending August 12th, showing the characteristic before the delivery date, and also suggesting panic market sentiment and cautious purchasing mood.