SMM Copper Market Daily Review (2014-6-17)

SHANGHAI, Jun. 18 (SMM) – LME copper prices overnight failed to stage a rebound seen in other base metals prices. In response, the most active SHFE 1408 copper contract swung by less than RMB 100/mt during Monday’s night session, hovering mostly around the RMB 48,000/mt mark, and ended up RMB 130/mt at RMB 48,060/mt. During the night session, trading volumes for the most active contract continued to stand around 60,000 lots, and positions increased by 1,598 lots.

On Tuesday, SHFE copper prices fluctuated narrowly around RMB 48,200/mt after confronting resistance at RMB 48,250/mt, and closed up RMB 260/mt, or 0.54%, at RMB 48,190/mt. Trading volumes for the most active contract shed by 36,020 lots, and positions shrunk by 1,490 lots. SHFE copper prices are bouncing back, but whether the rebound is sustainable remains uncertain.

In the Shanghai physical market, copper was offered Tuesday at a RMB 380-600/mt premium over the SHFE front-month copper contract. Traded prices were RMB 49,150-49,230/mt for standard-quality copper and RMB 49,220-49,400/mt for high-quality copper. As SHFE copper prices extended gains, cargo holders intended to push traded prices higher to levels seen Monday following the delivery date. Market players regarded physical premiums in the morning trading as too much high, and virtually no transactions were reported. Physical premiums narrowed subsequently. The price gap between standard-quality and high-quality copper remained large since the SHFE/LME copper price ratio hovered at high levels. Guixi copper brand was quoted at firm prices. Middlemen entered the market to buy low-price copper supply, and downstream producers expressed low buying interest, universally holding that physical premiums were too high. Trading volumes were thin on Tuesday, with most transactions done among middlemen.

As SHFE copper prices hovered at high levels during the afternoon trading session, physical copper was quoted at a RMB 400-600/mt premium and traded at RMB 49,130-49,470/mt. Supply increased compared to volumes in the morning trading session, but trading activity remained quite on Tuesday.