SHANGHAI, Oct. 10 (SMM) –Negatively affected by tight cash flows at the month's end at enterprises, as well as a Shanghai Composite Index below 2,400 points, SHFE copper prices fell by their daily loss limit for two consecutive days, with the most actively-traded copper contract prices moving between RMB 51,600-55,800/mt. Due to a strong risk aversion sentiment from both long and short investors, trading volumes were up significantly by 1.84 million lots, while positions were down by 20,000 lots and without solid support at low-end prices.
In spot markets, cargo-holders were actively moving goods to generate cash prior to China's National Day holiday, and imported copper increased significantly due to an improvement in the SHFE/LME copper price ratio, which caused spot copper offers turn to discounts of RMB 100/mt from premiums of RMB 150-300/mt early in the week.
Since most downstream producers will suspend production for maintenance during China's National Day holiday, there was no significant stockpiling activity reported. In addition, tight capital availability and cautious sentiment towards copper price trends during the holiday period also dampened raw material purchases. Overall market consumption was down, and market transactions were muted.
SHFE copper market and Chinese stock markets will continue to fluctuate after the Chinese National Day holiday, given low investor confidence and limited support from longs. In the spot markets, SHFE 1110 copper contracts will be delivered in the first trading week after the holiday. The need for stocks replenishment and improvement in cash flow pressures will help improve post-holiday transactions.