SMM Copper Market Daily Review (2014-6-6)

SHANGHAI, Jun. 9 (SMM) – The most active SHFE copper contract started Thursday’s night session at RMB 48,070/mt, and closed up RMB 220/mt at RMB 48,280/mt. During the night session, traded volumes for the most active contract totaled around 130,000 lots, while positions lost 1,212 lots.

On Friday, SHFE copper prices hovered mostly around RMB 48,300/mt, meeting resistance at RMB 48,360/mt, and finished up RMB 200/mt, or 0.42%, at RMB 48,260/mt. Traded volumes for the most active contract shed 64,122 lots, while positions decreased 12,630 lots.

In the Shanghai physical market, copper was offered Friday at RMB 240-420/mt premium over the SHFE front-month copper contract. Traded prices were RMB 49,800-50,100/mt for standard-quality copper and RMB 49,900-50,100/mt for high-quality copper. SHFE copper prices became more resistant to declines, while the SHFE/LME copper price ratio also improved appreciably. Meanwhile, the probe into metals financing at the Chinese port of Qingdao fermented.

As a result, a large amount of warehouse receipts flocked into the market, significantly inflating market supply, and cargo holders slashed premiums to make deals. Physical premiums gradually fell to RMB 350/mt, down from RMB 500/mt in the morning trading session. Middlemen were mostly selling goods, while downstream producers began purchasing goods ahead of the weekend. Supply, however, continued to outpace demand in the market with prevailing panic sentiment.

The SHFE front-month copper contract fell during the afternoon trading session, helping narrow the price gap between the SHFE 1406 and 1407 copper contracts. Cargo holders continued to move goods at lower premiums, with standard-quality copper barely found in the market. Physical copper was largely offered at a RMB 200-350/mt premium and traded between RMB 49,750-49,900/mt. Premiums rebounded at the tail of the trading after SHFE copper prices fell further, but no transactions were reported. In addition, SHFE copper inventories decreased by 5,447 lots to 86,500 lots last week. As an increasingly larger amount of imported copper flock in the market, copper premiums look set to extend losses. Meanwhile, China’s copper inventories are expected to grow with imported copper flowing into the market as collateral for financing.