China Copper Futures Settle Sharply Dn;More Losses Tipped

Copper futures traded on the Shanghai Futures Exchange settled sharply lower Friday, with most contracts hitting limit-down, as sentiment turned bearish for the short term due to unfavorable technical charts and concerns of rising supply.

The benchmark February 2007 contract fell CNY2,360 to settle at CNY59,300 a metric ton, after trading between CNY59,190/ton and CNY59,790/ton.

Overall trading volume fell to 35,668 lots from 52,404 lots Thursday. One lot is equivalent to five tons.

"Now that LME has breached $6,600, we can hardly see any technical support above $6,000. We'll see further losses in the next one or two weeks," said Ren Jingwen, an analyst at Huawen Futures Co.

Three-month LME copper fell $195 to end the late kerb Thursday at $6,330/ton. It was quoted at $6,325/ton around 0700 GMT, when Shanghai market closed.

Ren said SHFE lagged behind LME's losses earlier, due to a strong spot market, and the breach of the key technical support level for the three-month London Metal Exchange contract triggered the selling.

"The favorable ratio between the SHFE and LME since earlier this month can't last for long, because if so, more imports will weigh on cash prices and then futures," said Li Rong, an analyst at Great Wall Futures Co.

Analysts said the local market will soon see more imports. According to a report released by the Shanghai exchange after the market's close showed copper stocks rose 445 tons to 28,126 tons.

Cash prices fell sharply on the losses in futures.

On the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, spot copper was quoted at CNY61,200-CNY61,400/ton, sharply lower than Thursday's CNY63,500-CNY63,750/ton.

Shanghai's aluminum futures settled weaker on a spillover effect from copper, analysts said.

The benchmark March 2007 contract gave up CNY250 to settle at CNY20,020/ton, after trading between CNY19,810/ton and CNY20,040/ton.

China's futures markets are off-limits to foreign investors.

Friday's closing prices in yuan a metric ton versus LME late kerb prices from Thursday in dollars a metric ton:

 
          Copper       Change    Aluminum      Change
Shanghai  Feb 59,300   Dn2,360   Mar 20,020    Dn 250
LME       3Mo $6,330   Dn $195   3Mo $2,768    Dn $4