SMM Daily Review - 2011/11/15 Copper Market

SHANGHAI, Nov. 16 (SMM) –As LME copper prices pared gains overnight, SHFE 1201 copper contract prices opened 450/mt lower at RMB 57,520/mt on Tuesday. After the opening, SHFE three-month copper contract prices gradually drifter lower and came under pressure at the daily moving average due to growing selling pressures, with a low touching RMB 57,120/mt in the afternoon session. However, due to support at RMB 57,000/mt and increasing establishment of new positions at this price mark, and since LME copper prices experienced a round of increases and the Shanghai Composite Index also reversed earlier declines, SHFE three-month copper contract prices returned to near the daily moving average of RMB 57,500/mt and fluctuated widely around this price mark. Finally, SHFE 1201 copper contract prices closed at RMB 57,490/mt, down RMB 480/mt or 0.83%. Positions for SHFE 1201 copper contracts were down 5,390 lots, and trading volumes were down 180,000 lots, while positions for SHFE 1202 copper contracts were up 12,618 lots, suggesting the shift of the most actively-traded copper contracts. SHFE copper prices still faced resistance at the 10-day moving average of RMB 57,500/mt.    

In the spot market, cargo-holders were eager to move goods to generate cash at the highs as SHFE copper prices moved lower after a low open, and since the price differential between SHFE 1111 and 1112 copper contracts was RMB 700/mt and the price gap between SHFE 1111 and 1201 copper contracts was RMB 1,000/mt. In this context, copper discounts were initially quoted between negative RMB 300-200/mt and expanded to between negative RMB 350-250/mt near the midday. Traded prices for standard-quality copper were between RMB 58,100-58,200/mt, and RMB 58,150-58,400/mt for high-quality copper. Downstream producers opted to stand on the sidelines during the whole trading day, while speculators chose some opportunities to conduct hedge trading. Market surpluses made spot copper premiums impossible. In the afternoon session, as SHFE current-month copper contract prices fell, the price differential with SHFE 1112 copper contract prices narrowed to RMB 200/mt, and spot copper discounts decreased to around negative RMB 100/mt and turned into negative RMB 0/mt at the tail of trading. Traded prices fluctuated around RMB 58,000/mt in the afternoon session, and fewer downstream producers made purchases, while speculators had no purchasing interest.