SMM Copper Market Daily Review (2012-10-19)

SHANGHAI, Oct. 22 (SMM) – As LME copper prices fell after initially increasing overnight, SHFE 1301 copper contract, the most active one, started flat at RMB 59,150/mt last Friday. The contract dipped after temporarily rising to RMB 59,200/mt following the opening, and then fluctuated narrowly around RMB 59,060/mt in the first trading session. As Chinese A-shares slipped, SHFE copper prices continued falling in the second trading session and drifted lower to RMB 58,500/mt in the afternoon before touching an intraday trough at RMB 58,380/mt. Moving gradually away from the daily moving average, SHFE 1301 copper contract settled RMB 690/mt or 1.17% lower at RMB 58,460/mt, with trading volumes and positions up by 22,704 lots and 4,168 lots, respectively. The most active copper contract came under pressure at the 20-day moving average due to short selling and was likely to lose support at the 30-day moving average.
  
Spot copper discounts were negative RMB 60-240/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 58,580-58,780/mt, and RMB 58,680-59,020/mt for high-quality copper. As SHFE copper prices started flat and fluctuated, spot copper discounts stabilized between negative RMB 100-240/mt, and merely discounts for the “Guixi” brand were quoted negative RMB 80/mt but received little response from markets. At 11 am, SHFE copper prices were dragged down below RMB 59,000/mt owing to the falling Chinese A-shares, so some spot copper cargo-holders narrowed discounts to negative RMB 60-180/mt, but downstream producers awaited lower price levels. Near the midday, forward SHFE copper contracts gained falling momentum and compelled hedged traders to take profit-taking. Spot copper discounts thus remained between negative RMB 80-220/mt, still failing to entice market buyers. In the afternoon, SHFE copper prices slipped to RMB 58,600/mt, but declines in forward SHFE copper contracts narrowed, depressing hedged trading and helping spot copper discounts hold between negative RMB 50-200/mt. Traded prices fell to RMB 58,300-58,550/mt in the afternoon, but spot market activity was not seen to improve. SHFE copper stocks added by 15,196 mt to 196,710 mt last Friday, highlighting market oversupply.