SMM Daily Review – 2012/5/16 Copper Market

SHANGHAI, May 17 (SMM) – As LME copper extended losing streak overnight, the most active SHFE 1208 copper contract opened RMB 130/mt down at RMB 55,530/mt Wednesday. After the opening, the contract drifted lower after hovering briefly around the opening price, with a high at RMB 55,700/mt. In the afternoon session, LME copper slid below USD 7,700/mt and dragged down the contract gradually to as low as RMB 54,660/mt after losing RMB 55,000/mt. Finally, SHFE 1208 copper contract ended at RMB 54,690/mt, down RMB 970/mt or 1.74%, with trading volumes and positions falling by 16,980 lots and 3,624 lots, respectively. However, trading volumes and positions for SHFE 1209 copper contract increased by 109,000 lots and 61,138 lots, respectively, highlighting the continuous shift of the most active copper contract. Positions for all SHFE copper contracts exceeded 600,000 lots as short investors began to dampen markets, inverting from previous cautious attitudes. In this context, SHFE copper prices will continue to fall for the foreseeable future.

SHFE copper prices hovered around RMB 56,000/mt in the morning. Traders in spot markets sold aggressively during the first trading day after SHFE 1205 copper contract was delivered, leading to active market activity. Quotations for spot copper premiums were between positive RMB 80-140/mt in Shanghai in the morning business. As SHFE copper prices fell to around RMB 55,800/mt after 10 am, offers for spot copper premiums increased to positive RMB 80-150/mt. Traded prices for standard-quality copper were between RMB 55,900-56,000/mt, and RMB 55,940-56,100/mt for high-quality copper. Downstream producers stepped up purchases at prices below RMB 56,000/mt, helping improve overall market transactions in the morning. In the afternoon, SHFE copper prices continued to fall, down by RMB 300/mt, with SHFE 1206 copper contract prices retreating to around RMB 55,500/mt, causing spot copper premiums to increase further. Premiums on high-quality copper were quoted between positive RMB 220-250/mt, and some cargo-holders even offered as high as positive RMB 270-300/mt, showing strong reluctance to sell at the lows. Traded prices lost RMB 56,000/mt completely in the afternoon, and markets were dominated by wait-and-see attitudes, although some downstream producers entered markets. Market transactions fell in the afternoon as a result.