SMM Daily Review – 2012/7/17 Copper Market

SHANGHAI, Jul. 18 (SMM) – As LME copper stabilized overnight, SHFE 1210 copper contract, the most active one, started RMB 340/mt up at RMB 56,420/mt Tuesday. After the opening, the contract fell rapidly after temporarily climbing to a high of RMB 56,560/mt, down to around RMB 56,200/mt, as longs conducted profit-taking, with the high price level restricted by an earlier high of RMB 56,350/mt. In the afternoon, SHFE copper prices followed LME copper prices to slip, coming under pressure at the daily moving average and gradually moving away from this price mark. However, SHFE copper prices then stopped falling after retreating to the previous session’s low of 55,790/mt, hovering narrowly around RMB 55,900/mt and narrowing some of daily declines at the tail of trading. SHFE 1210 copper contract finally settled RMB 160/mt or 0.29% lower at RMB 55,920/mt, with trading volumes and positions decreasing by 21,888 lots and 14,702 lots, respectively. Positions for all SHFE copper contracts fell by 7,306 lots while trading volumes added by 72,710 lots. The shift of the most active copper contract began as selling pressure for forward SHFE copper contracts grew again. With longs and shorts struggling severely at RMB 56,000/mt, SHFE copper prices are likely to remain within current pricing range over the near term.

As SHFE copper prices extended rebounds, some hedged copper was restricted in the morning. In the face of falling SHFE/LME copper price ratio, cargo-holders of imported copper tried to raise premiums. Spot copper offers were generally between premiums of positive RMB 0-80/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 56,180-56,270/mt, and RMB 56,220-56,350/mt for high-quality copper. The price gap between standard and high-quality copper widened. A small number of cargo-holders were moving goods at slight discounts to generate cash eagerly, but appropriately scaled back sale volumes near the midday when SHFE copper prices dropped rapidly. No price spread among SHFE copper contracts kept traders on the sidelines, while downstream producers resisted high spot copper premiums, leading to muted market activity in the morning. In the afternoon, as SHFE copper prices dropped rapidly, mainstream spot copper premium quotes rose to positive RMB 40-120/mt. Traded prices were between RMB 55,950-56,150/mt in the afternoon, with some downstream buying below RMB 56,000/mt, but overall market transactions remained limited.