Shanghai copper futures started strong on Monday in the wake of historically high international prices, but retreated to close just slightly up as additional spot supplies weighed on the market.
London Metal Exchange copper futures hit a record high of $4,243 a tonne on Friday, as traders bet that China's State Reserves Bureau would not be able to deliver against what is widely believed to be a substantial short position.
The SRB sold 20,000 tonnes of spot copper in an auction last on Wednesday, and will do so again this on Wednesday. "The extra spot supply is really weighing on the market, but I don't think the bureau really has enough LME-quality copper to export 200,000 tonnes like we hear," said a Shanghai-based broker.
"If you look at the copper that was auctioned, they started out with some good copper but then the prices came down, so the quality must not have been great." Some traders with long positions have liquidated them, traders said.
Some traders said the liquidation was in response to government pressure not to support copper prices, but others disagreed. "I don't think there's any pressure. Longs got out to protect themselves. They were mostly in December and January, where they were most exposed to the weak spot market," said analyst Wang Zheng of Shanghai Dale Futures.
Spot prices fell 150 yuan to 39,000-39,150 yuan ($4,825-$4,843) a tonne on Monday. Shanghai's most active January contract ended at 37,100 yuan a tonne, up 40 yuan from Friday's close. Combined trading volume fell to 57,200 lots from 75,140 lots on Friday.
LME three-month copper futures were at $4,238.50 a tonne, up from $4,157.50 a tonne when Shanghai markets closed on Friday. Shanghai aluminium futures mostly fell on Monday, with the most-active February contract ending at 17,270 yuan a tonne, down 30 yuan from Friday's close.
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