Shanghai copper dips

Shanghai copper prices fell over 2 percent in restrained trade on Tuesday and turnover was also thin for most London Metal Exchange contracts as business slowed ahead of the year-end holidays.
The aluminium market was slightly softer, but the expiry of December options in London and the likelihood of the return of Chinese consumers after the New Year could make for volatile conditions, dealers said. Chinese copper futures prices slipped, with the most active February contract shedding 1,400 yuan, or 2.1 percent, to end at 63,940 yuan ($8,197) per tonne.
"Shanghai copper is forecast to be weak with light trading volume in both cash and futures markets," said Jingo Zhengyu, a trader at Zhejiang Hailing Group, a major copper pipe maker in eastern China. "In my experience, December is not a low season for spot trading, but I feel the market has lost momentum now," he said.
Cash copper in eastern China ranged between 66,250 yuan to 66,650 yuan, down 400 yuan a tonne from the previous day. Copper for delivery in three months on the London Metal Exchange fell to $6,965 a tonne, against $7,000 at the London kerb close.
On the supply side, Papua New Guinea's Ok Teddy Mining Ltd said on Tuesday it may dig an underground mine to replace its copper-rich pit, extending the environmentally troubled operation beyond its 2013 closing date. One of the richest in the southern hemisphere, the mine yields around 200,000 tonnes of high-grade copper a year and 15 tonnes of gold, with a loyal customer base in Asia and Europe.
Reserves are sufficient to run the open pit mine for another seven years. Aluminium edged slightly lower to $2,800 from $2,812 at the close in London on Monday, when the contract hit a three-week high of $2,835, boosted by option expiry for December on Wednesday.
The expiry of December options, when holders can exercise their right to buy or sell the underlying future, has become the focus of attention as one market participant is estimated to be holding between 50 and 80 percent of the available stock in aluminium. "This situation has created a sense of nervousness in the short-term aluminium market as that large position could either move forward or be brought to delivery, effectively squeezing the market," said Peter Richardson, Deutsche Bank's chief metals economist in a daily note.