China Copper Futures Settle Lower On LME Losses

SHANGHAI--Copper futures traded on the Shanghai Futures Exchange settled sharply lower Friday on overnight profit-taking in three-month London Metal Exchange copper.

Analysts said following sharp gains in recent sessions, copper is entering a consolidatory period but may test $8,000 again in the coming sessions amid overall positive sentiment on the commodities complex.

Shanghai's benchmark July 2007 contract settled CNY1,390 or 1.9% lower at CNY71,210 a metric ton, after trading between CNY70,710 and CNY71,680/ton.

Trading volume for all Shanghai copper futures fell to 125,578 lots from 173,908 lots Thursday. One lot is equivalent to five tons.

"What we now have is generally positive sentiment over commodities, which attracts speculative money inflows, so I think there's not much downside for copper," said an analyst in Shanghai.

Three-month LME copper is likely to test $8,000 again next week amid divergent market opinions, the analyst added.

It fell $149 to end the late kerb Thursday at $7,680/ton and was quoted at $7,700/ton around 0700 GMT, when the Shanghai market was closed.

Meanwhile, good domestic demand is underpinning cash prices, with the discount of cash prices to the front-month SHFE contract narrowing to around CNY100 Friday versus CNY400 Thursday.

At the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, copper was quoted at CNY69,500-CNY69,700/ton, down from CNY70,520-CNY70,670/ton Thursday.

Along with the narrowing discount, copper stocks at Shanghai Futures Exchange monitored warehouses fell 112 tons from a week ago to 60,971 tons as of Friday.

Market participants said a continuous drop in warehouse stocks and shrinking discount of cash prices in the coming weeks probably indicate strong consumption in the second quarter.

Zinc and aluminum futures also settled lower, along with the losses in copper.

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:

 
            SHFE                   LME
Copper      Jul 71,210   Dn 1,390  3Mo $7,680   Dn $149
Aluminum    Jul 19,760   Dn   110  3Mo $2,830   Dn $41
Zinc        Jul 31,905   Dn   980  3Mo $3,500   Dn $20