Shanghai copper futures climbed for a second straight session on Friday, driven by higher international prices and expectations of lower inventories in futures exchange warehouses.
Speculation that warehouses would report steep drops in weekly inventory levels proved unfounded, when exchange data released after the market closed showed stocks had barely budged.
Copper stocks fell 112 tonnes in the week ended on Thursday, to 74,160 tonnes. Traders had expected stocks to fall, reflecting recent domestic sales by the State Reserves Bureau and presumed exports as the bureau readies copper to deliver against a large short position taken out by a trader working on its behalf.
On Friday, the LME reported 1,250 tonnes of copper had entered its warehouse in Pusan, South Korea. Some traders calculate that 6,000 to 8,000 tonnes have already been shipped from Ningbo, China.
"I think copper prices will stay strong, at least until December 1 after the SRB's next auction. Then prices should fall in January, because the pressure from the shorts will be gone and everything will slow down for Chinese New Year," said a Shanghai-based analyst.
On Friday, spot copper prices in eastern China rose to 38,300 to 39,200 yuan ($4,739-$4,851), up 800 yuan. Shanghai's most-active futures contract January ended at 36,700 yuan, up 700 yuan from Thursday's close.
Combined trading volume rose to 95,484 lots, up from 78,178 lots on Thursday. The benchmark LME three-month copper contract was at $4,205 a tonne, up $80 a tonne from the close of Shanghai markets on Thursday.
Shanghai aluminium futures rose on Friday, with the most-active March contract ending at 17,680 yuan a tonne, up 250 yuan from Thursday's close.
Combined trading volume spiked to 35,688 lots from 10,348 lots.
"International analysts aren't all that bullish about aluminium but domestically, we feel good about aluminium.
People feel the gap will narrow," said analyst CIA Luoyi of China International Futures Co. "There's a new strategy buy aluminium, sell copper."
Benchmark LME aluminium futures rose to $2,087.50 a tonne, up from $2,071.50 a tonne when the Shanghai markets closed on Thursday.
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