Copper posts a strong gain in LME, SHFE, COMEX; Will it continue?

CHINA September 17 2014 1:33 PM
LONDON (Scrap Register): Copper prices are posted a strong gain in the London Metal Exchange, Shanghai Futures Exchange and the Comex division of the New York Mercantile Exchange on Tuesday.

Comex Copper
Copper prices in the Comex division of the New York Mercantile Exchange recored its biggest one-day gain in nearly four weeks on Tuesday after the dollar weakened and China announced supportive measures for its banking sector.

The most actively traded contract, for December delivery, surged 8.05 cents, or 2.6 per cent, to $3.1660 a pound on the Comex division of the New York Mercantile Exchange. This was the highest settlement since September 8, and the largest one-day gain since August 20.

LME and SHFE Copper
The copper prices at LME and SHFE are bosted by the report about the People's Bank of China (PBOC)'s liquidity injection on Tuesday. LME copper prices advanced to $6,960 per ton and November copper on SHFE soared by 2% to 49,590 yuan per ton during Tuesday's night session, reported Shanghai Metal Markets.

According to Sina.com, Tuesday night the PBOC was provide a 500 billion yuan ($81 billion) of liquidity to China's five biggest banks through standing lending facilities (SLF). The SLF with tenor of three months is said to have an impact similar to a 0.5-percentage-point cut in RRR.

Will this news proffer impetus for copper to rise further?

"Despite the encouraging news, copper prices will still be affected by expectation of growing supply. The weak market fundamentals will impose a ceiling on any further increase," said an analyst at Minmetals Futures to SMM.

Another analyst at Shanghai CIFCO Futures also warned ot SMM about the influence of increasing copper concentrate supply, and remained relatively bearish towards copper prices for the medium term.

"Investors need to be wary of a correction following the sharp rise. Besides, report on easing policies should exert limited influence on copper market against the backdrop of increasing supply and anemic demand," said analyst at Capital Futures to SMM.

Overall, investors are advised to remain cautious before PBOC's further move and the Fed's policy meeting.