SMM Daily Review – 2012/4/18 Copper Market

SHANGHAI, Apr. 19 (SMM) –The most-traded SHFE copper contract for delivery in July opened RMB 440/mt up at RMB 57,260/mt Wednesday, as LME copper prices rallied overnight. SHFE copper prices moved lower after the opening, negatively affected by LME copper price movement, testing RMB 57,000/mt and falling to a low at RMB 56,910/mt. Near the midday, the Shanghai Composite Index surged by almost 2%, sending SHFE copper prices up to a level near RMB 58,000/mt. However, SHFE copper prices met resistance near this price mark, while short covering emerged. SHFE copper prices only touched a high at RMB 57,960/mt in the afternoon session and were pressured down below RMB 58,000/mt as new short investors entered the market, posting much weaker performance than LME copper. Finally, SHFE 1207 copper contract prices closed RMB 1,000/mt or 1.76% higher at RMB 57,820/mt. Positions for SHFE 1207 copper contract were down by 14,322 lots, while trading volumes were up 242,000 lots. Positions for SHFE 1208 copper contract were up 10,790 lots. SHFE copper prices need support from LME copper to break resistance at the 5-day moving average.

As SHFE copper prices edged higher, spot copper premiums turned into discounts of RMB 0-70/mt in the morning business. Cargo-holders chose to cut sale volumes at lower price levels. Low-quality hydro-copper was rarely seen in markets, and standard-quality copper supply was also limited. Downstream producers slowed purchases as they held skeptical attitudes towards copper price rebounds. Near the midday, copper prices surged by nearly RMB 1,000/mt, incurring chaos in market quotations. A small number of cargo-holders who didn’t hedge against copper offered discounts of above negative RMB 100/mt, enticing some speculators to buy. Traded prices for standard-quality copper were between RMB 56,950-57,350/mt in the morning session, and RMB 57,000-57,400/mt for high-quality copper. Wait-and-see sentiment was growing as consumption slowed further, and market activity stagnated at prices above RMB 57,200/mt in the morning business. In the afternoon session, SHFE copper prices kept fluctuating at the highs, but spot copper offers were still in chaos, with mainstream offers reported between discounts of negative RMB 150-100/mt. Traded prices increased to between RMB 57,400-57,600/mt, and some traders favored high-quality copper with large discounts.