SMM Daily Review - 2011/11/11 Copper Market

SHANGHAI, Nov. 14 (SMM) –As LME copper prices narrowed Asian hour declines overnight, SHFE 1201 copper contract prices, the most active one, opened 30/mt up at RMB 55,100/mt on Friday. After the opening, SHFE three-month copper contract prices temporarily tested the level near the lower trading limit on the previous day, but then returned and fluctuated around the daily moving average after gaining support at RMB 54,930/mt, and followed LME copper prices to push up before the afternoon session. In the afternoon session, as LME copper prices slid by nearly USD 50/mt after meeting resistance at the highs, and since the Shanghai Composite Index turned to fall after initially increasing, SHFE three-month copper contract prices met pressures at RMB 56,000/mt, with an intraday high at RMB 55,950/mt, and pared gains at the tail of trading, returning to the daily moving average of RMB 55,500/mt. Finally, SHFE 1201 copper contract prices closed at RMB 55,610/mt, up RMB 540/mt or 0.98%. Positions for SHFE 1201 copper contracts were slightly up 2,492 lots, and trading volumes were up 330,000 lots, with the daily handover rate reaching as high as near 400%. With the 30-day moving average gradually becoming the new resistance, SHFE copper price would fall further.      


In the spot market, as SHFE copper prices opened nearly flat, spot copper premiums sustained and were initially reported between positive RMB 50-150/mt in the morning session. However, as SHFE copper prices moved higher, spot copper premiums gradually narrowed to between positive RMB 0-150/mt. Traded prices for standard-quality copper were between RMB 56,300-56,500/mt in the morning business, and RMB 56,400-56,600/mt for high-quality copper. Spot copper supply was sufficient since the SHFE/LME copper price ratio increased slightly, with high-quality copper dominating the market. As SHFE copper prices climbed too quickly, spot copper premiums fell, restricting market transactions for standard-quality copper. Despite increases in market purchases, market supply still outstripped market demand. In the afternoon session, as SHFE copper prices edged up and since market transactions were still weak, standard-quality copper failed to maintain premiums of positive RMB 0/mt, and copper premiums for high-standard-quality copper also fell slightly, with mainstream price offers quoted between discounts of negative RMB 50/mt and premiums of positive RMB 50/mt. Traded prices in the afternoon business were nearly unchanged from the morning business, and some downstream producers entered the market to make purchases. SHFE copper inventories were slightly down 475 mt to 83,360 mt in the week ending November 11th. Overall, market surpluses extended for the week, and speculative activity was stable, while downstream producers slowed purchases.