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SMM Daily Review – 2012/5/25 Copper Market
May 28,2012 09:12CST
smm insight
Source:SMM
SHFE 1209 copper contract started RMB 260/mt lower at RMB 55,150/mt last Friday. Spot copper premium quotes narrowed to positive RMB 220-300/mt in the morning business.

SHANGHAI, May 28 (SMM) – As LME copper remained weak overnight, the most active SHFE 1209 copper contract started RMB 260/mt lower at RMB 55,150/mt last Friday. The contract moved lower following the opening as longs closed positions and shorts imposed selling pressures, down to RMB 54,830/mt. In the afternoon, a falling US dollar helped LME copper rally to USD 7,600/mt, so the contract broke the RMB 55,000/mt mark abruptly before climbing directly to a high of RMB 55,460/mt. In this context, shorts chose to leave the market. However, Chinese stock markets lost by nearly 1%, dragging down SHFE copper prices. Finally, SHFE 1209 copper contract still closed RMB 480/mt or 0.87% up at RMB 55,370/mt, with trading volumes decreasing by 69,196 lots but positions increasing by 5,386 lots. Longs quitted the market at the tail of trading since they were skeptical about a continuous copper price rebound. SHFE copper price movement experienced a V shape for two consecutive days, highlighting increasing divergence between longs and shorts, who were both wary of operations at RMB 55,000/mt to avert overnight risks.

SHFE copper prices retreated after starting higher, propelling cargo-holders in spot markets to sell. Spot copper supply increased as a result, leading spot copper premium quotes to narrow to positive RMB 220-300/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,820-55,900/mt, and RMB 55,870-55,980/mt for high-quality copper. Some traders were pessimistic about future copper prices and thus hedged against price volatilities. However, downstream producers stuck to the sidelines, leaving market activity lackluster in the morning. In the afternoon session, as SHFE copper prices rose rapidly and helped the SHFE/LME copper price ratio improve swiftly, cargo-holders of imported copper in spot markets stepped up sale volumes. In consequence, spot copper premium quotes fell further to positive RMB 120-200/mt in the afternoon, while traded prices marched slightly higher to RMB 55,930-56,050/mt, with limited market transactions. SHFE copper stocks decreased by 16,325 mt to 157,489 mt last Friday, as copper smelters and trading firms delivered copper to the LME warehouses, and since downstream producers went bargain hunting at the lows.  
 

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