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SMM Daily Review - 2011/10/18 Copper Market
Oct 19,2011 08:54CST
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SHFE 1112 copper contract prices opened RMB 890/mt lower at RMB 55,250/mt on Tuesday. In the spot market, cargo-holders significantly pushed up copper premiums to positive RMB 250-350/mt.

SHANGHAI, Oct. 19 (SMM) –As LME copper prices overnight fell by more than 1%, SHFE 1112 copper contract prices, the most active one, opened RMB 890/mt lower at RMB 55,250/mt on Tuesday. As Chinese stock markets suffered great resistance during the whole trading day and lost 2,400 points, and since LME copper prices remained weak, SHFE three-month copper contract price trends failed to improve. China’s National Bureau of Statistics (NBS) Tuesday morning announced China’s GDP data for the third quarter, which was within market expectations and eased the declining pace of SHFE copper prices. At the tail of trading, Chinese stock markets fell below the 10-day moving average, and LME copper prices lost USD 7,300/mt, dragging down SHFE three-month copper prices to an intraday low of RMB 53,680/mt after falling below the RMB 54,000/mt mark. Finally, SHFE 1112 copper contract prices closed at RMB 54,000/mt, down RMB 2,140/mt or 3.81%. Positions for SHFE 1112 copper contracts were down 26,612 lots, and trading volumes were down 1,194 lots, while positions and trading volumes for SHFE 1201 copper contracts were up 47,086 lots and 157,000 lots respectively, highlighting the shift of the most actively-traded copper contracts. The handover rate remained as high as 215%, and short investors came to dominate the market again, with the 5-day moving average becoming the resistance.    

In the spot market, cargo-holders significantly pushed up copper premiums to positive RMB 250-350/mt from RMB 200-300/mt in the morning business, as SHFE copper prices slumped by 3%, and since losses for imported copper gradually increased due to the falling SHFE/LME copper price ratio. Traded prices for standard-quality copper were between RMB 54,900-55,100/mt in the morning business, and RMB 55,000-55,300/mt for high-quality copper. Previously hedged copper came on the market, and cargo-holders of domestic copper were also active moving goods for cash generation given higher copper premiums, keeping overall market supply very ample. Downstream producers made purchases on an as-needed basis, while speculators had no profit room on account of higher copper premiums, resulting in moderate market transactions. SHFE copper prices remained weak in the afternoon session, and spot copper premiums rose again to between positive RMB 300-450/mt. Traded prices in the afternoon session were held firm with the morning levels, and some cargo-holders believed premiums would increase further Wednesday, causing supply of high-quality copper to contract compared with the morning business.     


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