SMM Daily Review – 2012/7/3 Copper Market

SHANGHAI, Jul. 4 (SMM) – As LME copper gave up some of the gains overnight, SHFE 1210 copper contract, the most active one, started RMB 170/mt down at RMB 55,320/mt Tuesday. The contract stabilized at the daily moving average following the opening but still suffered resistance at RMB 55,500/mt. LME copper surged rapidly to USD 7,800/mt during major trading hours and helped the contract increase above the RMB 56,000/mt mark, with a high at RMB 56,310/mt. In the afternoon, SHFE 1210 copper contract was restricted at the 60-day moving average and hovered at a relatively high level of RMB 56,100/mt. The Shanghai Composite Index dipped from earlier highs at the tail of trading, and led SHFE copper prices to lose RMB 56,000/mt. Finally, SHFE 1210 copper contract still closed RMB 610/mt or 1.10% higher at RMB 56,100/mt, with trading volumes adding by 109,000 lots but positions decreasing by 13,438 lots. As shorts returned a wait-and-see posture temporarily to shun risks during the day, SHFE copper prices failed to effectively break resistance at the 60-day moving average and are likely to test this price point repeatedly for the foreseeable future.

As SHFE copper prices fluctuated narrowly between RMB 55,800-55,850/mt in the early trading session, spot copper offers maintained slight premiums and attracted some traders to buy at the lows. However, SHFE copper prices followed LME copper to experience three rounds of surges during major trading hours, up by RMB 600/mt, compelling traders who made purchases earlier to move goods aggressively for cash. This caused spot copper premiums to fall swiftly, with high-quality copper even trading at about discounts of negative RMB 50/mt. Mainstream spot copper offers were between discounts of negative RMB 150-0/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,800-56,150/mt, and RMB 55,850-56,300/mt for high-quality copper. Downstream producers resisted prices above RMB 56,000/mt and merely bought as needed, while some traders made purchases when discounts for standard-quality copper expanded to around negative RMB 150/mt. In this context, market transactions were mainly contributed by traders. In the afternoon, as SHFE copper prices edged down due to resistance, spot copper discounts narrowed to negative RMB 80-20/mt, while traded prices stood completely above RMB 56,000/mt, up to RMB 56,150-56,300/mt.