SMM Daily Review – 2012/7/20 Copper Market

SHANGHAI, Jul. 23 (SMM) – As LME copper extended gains overnight, SHFE 1211 copper contract started RMB 200/mt up at RMB 56,290/mt last Friday. After the opening, the contract tried to climb to RMB 56,430/mt but was restricted around RMB 56,250/mt as new shorts exerted selling pressures. In the afternoon though, as LME copper retreated rapidly on an increasing US dollar, the contract dropped and finally reversed earlier increases. SHFE copper prices drifted lower to RMB 55,950/mt after losing RMB 56,000/mt, and suffered a great resistance at the RMB 56,000/mt mark with an intraday low touching RMB 55,850/mt. Finally, SHFE 1211 copper contract ended the day RMB 180/mt or 0.32% down at RMB 55,910/mt, with trading volumes and positions adding by 61,922 lots and 14,968 lots, respectively. Longs and shorts still held divergent views at RMB 56,000/mt, and investors still continued to sell at the highs but go bargain hunting at the lows. Therefore, SHFE copper prices will test support repeatedly at the 5-day moving average for the immediate future.

SHFE copper prices extended rebounds, so some hedged copper was locked, reducing spot copper supply. As the SHFE/LME copper price ratio continued to fall, imported copper cargo-holders insisted on firm premiums. Mainstream spot copper offers were between premiums of positive RMB 20-120/mt in the morning business. Traded prices for standard-quality copper were between RMB 56,180-56,300/mt, and RMB 56,250-56,380/mt for high-quality copper. Traders were hesitant to sell on increasing optimism copper prices would rise next week, while downstream producers stepped up purchases at the lows. But overall market activity remained cautious. In the afternoon, SHFE copper prices reversed earlier gains and helped cargo-holders of hedged copper move goods for cash amid relatively high premiums. Spot copper supply thus increased in the afternoon and restricted further upside room in copper premiums which held virtually with the morning levels. Traded prices, though, dropped to RMB 56,050-56,200/mt in the afternoon, enticing a small number of downstream producers to make purchases.