Shanghai copper falls 4 pct on London lossesadmin
Shanghai copper futures closed 4 percent lower on Tuesday, tracking the previous day’s losses in London when profit taking dragged copper down 3.8 percent.
The most active April contract was down 2,370 yuan at 51,910 yuan ($6,679) a tonne at the close. Just before the closing bell, copper was at its downside limit of 51,900 yuan.
Copper for delivery in three months on the London Metal Exchange was down $40 at $5,550 a tonne by 0708 GMT.
“LME copper is testing $5,500, but prices would get strong support below $5,000 if warehouses stock increases slow,” said Pang Ying, analyst at Minmetals Star Futures.
“But the markets in both London and Shanghai are faced with a dangerous situation if stocks continue to rise.”
LME stocks rose 5,975 tonnes to 213,675 on Monday and have doubled in the past 12 months.
Stocks rises totalling 7,550 tonnes into warehouses in Europe and the United States were partly offset by continuing drawdowns in Asian locations, where merchants are shipping LME metal to China to take advantage of a positive arbitrage and consumer buying.
“There has been some buying on a spot basis by consumers but I have yet to see them buying longer term. They are still pricing material as they need it,” a trader in Singapore said.
“The market, to my mind, is stuck in a $5,450 to $5,950 range and a break-out either side will give the next $400 move,” the Singapore trader said.
“Last week, too many people were bullish on copper, but I think we need to test $5,000 to $5,200 in the near term. That should hold. If it doesn’t, the market is in real trouble,” he added.
Standard Bank London said in a daily report: “Speculative money was principally the force behind the gains in the last few sessions and opportunities to book short-term profits are not being missed.”
On Monday, Phelps Dodge Corp. , the world’s second- largest copper producer, said it expected global copper consumption growth to remain strong at 3.5 percent in 2007 and the market to show a modest surplus or near balance. [ID:nN29181136]
The most traded April Shanghai aluminium futures contract fell 1.7 percent to 19,210 yuan, from 19,540 yuan.
LME aluminium was down $20 at $2,690 after shedding 3 percent on Monday.
“The battle between the funds continues in aluminium,” Standard Bank said.
It said the market was focused on prices for February as they neared call option strikes at $2,850 and $2,900.
As prices approach strike levels, option granters buy metal in order to hedge against the risk of exercise. This practice, known as delta hedging, can add fuel to a rally and drive prices even higher.
“Prices did not stay above $2,850 in the last attempt on Wednesday and therefore opinion is divided on whether the dominant long will fizzle out again in its attempt to move prices after failing to do so in December 2006.”
Nickel was down $150 at $37,250 a tonne. The market failed to hit a record peak on Monday after a series of fresh highs last week, culminating at $38,950 on Friday.