SMM Daily Review - 2011/10/13 Copper Market

SHANGHAI, Oct. 14 (SMM) –As LME copper prices overnight rose by nearly 2%, SHFE 1112 copper contract prices, the most active one, opened RMB 730/mt higher at RMB 54,880/mt on Thursday. After the opening, SHFE three-month copper contract prices briefly increased to an intraday high of RMB 55,450/mt as short-term long investors entered into the market, but then met resistance, with the low-end getting support at RMB 54,500/mt due to continuous gains in Shanghai Composite Index. In the afternoon session, SHFE three-month copper contract prices fell below the RMB 54,500/mt mark, reaching at a low RMB 54,320/mt, as LME copper prices retreated below USD 7,400/mt following a slight rebound in the US dollar index. Position closings at the tail of trading led SHFE 1112 copper contract prices to finish the day at RMB 54,880/mt, up RMB 730/mt or 1.35%. Positions for SHFE 1112 copper contracts were up 10,812 lots, while trading volumes were down 179,000 lots. Short investors overnight continued to increase positions, and long investors chose to close positions during the whole trading day. China would announce September CPI data and other important economic data Friday, and markets expected inflation would remain high and that tight credit situation would sustain, which would impose great pressures on SHFE copper prices. Therefore, SHFE copper prices would not rise significantly, even if the US dollar index falls and LME copper prices move higher.   

In the spot market, SHFE copper prices met resistance at RMB 55,000/mt, and copper offers were mixed since some cargo-holders were eager to move goods for cash generation, with the same brand offers having a price difference around RMB 200/mt. As the major trading hours arrived, previous low prices for high-quality copper were rarely seen. Due to the approach of delivery date, cargo-holders tried to push up copper premiums, which rose to positive RMB 50-150/mt. Traded prices for standard-quality copper were between RMB 55,050-55,200/mt in the morning business, and RMB 55,100-55,300/mt for high-quality copper. The number of market participants taking a wait-and-see stance was growing given low market confidence, bringing market transactions into a stalemate. SHFE copper prices fell in the afternoon session, but consumption remained weak, keeping spot copper premiums between positive RMB 50-150/mt. Traded prices declined between RMB 54,900 -55,150/mt, and market participants remained on the sidelines.