Shanghai copper futures dipped in thin Wednesday trade as investors kept a nervous eye for potential volatility on the London Metal Exchange, on speculation that China State Reserves Bureau might cover a large short position.
Domestic and international copper prices had risen to historic highs due in part to massive short positions on the LME believed to be held by the SRB. Although most of the positions were likely to have been closed out or rolled over to the first quarter of 2006 and beyond, it had originally been believed to fall due on December 21, traders said.
Spot prices edged up 75 yuan to 40,500-40,750 yuan a tonne. Trading volume of all domestic contracts dived to a slow 17,350 lots from an already thin 25,430 lots on Tuesday. "Movements of LME kerb prices today will determine the trend on the Shanghai market in coming days," said a second trader. Benchmark LME three-months were at $4,432.5 per tonne on Wednesday, up slightly from $4,429.50 at the same time on Tuesday. The Shanghai market closed at that time. Shanghai aluminium futures closed steady on Wednesday, with the most active March contract ending at 19,070 yuan a tonne, nearly unchanged from 19,080 yuan on Tuesday.
Trading volume remained heavy at 42,056 lots, though that was down from Tuesday's 59,002 lots, exceeding the copper contracts volume for the ninth straight day, rare for Shanghai's market.
Traders said aluminium prices could rise in the near term after having jumped since late last month amid worries over production cuts by domestic smelters, possible higher alumna prices and government controls over smaller and older plants.
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