SMM Copper Market Daily Review (2014-2-25)

SHANGHAI, Feb. 26 (SMM) – SHFE 1405 copper contract prices started Monday’s night session at RMB 49,800/mt and dropped rapidly to test a low of RMB 49,460/mt. The April-delivery copper on SHFE then regained some losses and closed the session down RMB 80/mt at RMB 49,840/mt. Trading and positions soared. SHFE copper for May delivery showed increased volatility during day trading on Tuesday, touching a high of RMB 50,350/mt before falling back. In the afternoon, the prices remained under resistance at RMB 50,000/mt but found support at RMB 49,800/mt. However, a 2.4% slump in Chinese stock market at the tail of trading caused SHFE 1405 copper contract prices to drop and close at RMB 49,520/mt, down by RMB 400/mt or 0.8%. Traded volumes and positions for the most active SHFE copper contract grew by 58,556 lots and 27,492 lots, respectively.

Holders of imported copper were in a rush to sell given tight cash flow by month’s end and weakening RMB, causing spot discounts in copper market to fall. The influx of hedged goods exacerbated oversupply pressure in the market, with spot copper quoted at discounts of RMB 200-380/mt against the SHFE 1403 copper contract price in the morning. Traded prices were RMB 49,580-49,700/mt for standard-quality copper and RMB 49,680-49,820/mt for high-quality copper. Some hydro-copper was offered at discounts of RMB 500/mt. Although some traders sourced goods in the market, supply remained well above consumption. Downstream buyers mostly stood on the sidelines, leaving transactions limited. Smelters turned cautious after the price slumped, leaving fewer domestic copper available in the market. In the afternoon, trading waned and spot discounts remained at RMB 200-350/mt, with traded prices at RMB 49,700-49,800/mt. Market expects spot discounts to expand.