SMM Daily Review - 2011/10/19 Copper Market

SHANGHAI, Oct. 20 (SMM) –As LME copper prices overnight narrowed losses, SHFE 1112 copper contract prices opened RMB 260/mt higher at RMB 54,810/mt on Wednesday. After the opening, SHFE three-month copper contract prices met resistance after briefly reaching to a high of RMB 55,300/mt, and then long and short investors severely struggled at the RMB 55,000/mt level. Near the closing time of midday, Shanghai rubber on the Shanghai Futures Exchange took a lead in declines, sliding by 5%, causing SHFE three-month copper contract prices to fall by nearly RMB 500/mt. In the afternoon session, as the Shanghai Composite Index was pressured at 2,400 points and short investors took the opportunity to enter into the market, and since LME copper prices already fell below the support of 10-day moving average, SHFE three-month copper contract prices declined to a low of RMB 53,870/mt after sliding below the RMB 54,000/mt mark. However, SHFE three-month copper contract prices narrowed losses at the tail of trading after short investors reported profit-taking. Finally, SHFE 1112 copper contract prices closed at RMB 54,300/mt, down RMB 250/mt or a loss of 0.46%. Positions for SHFE 1112 copper contracts were down 33,900 lots and trading volumes were down 116,000 lots, while positions and trading volumes for SHFE 1201 copper contracts were up 30,630 lots and 271,000 lots, completing the shift of the most actively-traded copper contracts. SHFE copper prices remained weaker than LME copper prices, with the 5- and 10-day moving averages becoming the recent new technical resistance.       

In the spot market, as SHFE copper prices slightly rebounded, copper premiums narrowed compared with the previous trading day, reporting between positive RMB 150-250/mt. Traded prices for standard-quality copper were between RMB 55,300-55,450/mt in the morning business, and RMB 55,350-55,600/mt for high-quality copper. Spot copper supply contracted compared with a day earlier since some hedged copper was locked. Downstream producers' purchasing interest weakened following the bargain hunting at low prices on the prior day, and market transactions were mainly arbitrage transactions made by speculators in the morning business. In the afternoon session, SHFE copper prices slipped by RMB 100/mt, helping spot copper premiums to increase to between positive RMB 300-450/mt, while mainstream traded prices were between RMB 54,650-55,100/mt. Speculators' operating interest fell due to limited arbitrage room in the afternoon session, keeping market transactions limited.