Copper prices fluctuated widely on the London Metal Exchange (LME) on Wednesday, continuing to monitor the China situation, eventually ending softer.
Initial declines took the market down to near $4,000 a tonne before a subsequent strong bounce back up to $4,118, with last trade at $4,090, down $20. "It has been such a nervous day. A few people shorted it early, and then were forced to take cover," a trader said.
Initial declines took place against a background of a net 2,450-tonne stock increase. This was entirely due to 3,000 tonnes of copper delivered into Pusan today - the second such delivery since Friday and likely to be Chinese metal against upcoming shorts.
There are now 24,350 tonnes of copper in Pusan, which with the metal in Gwangyang makes a total of 41,050 tonnes in Korea available to be delivered against December dates. Easing spreads and Chinese copper sales have also taken some steam out of the rampant market, which hit a new record of $4,243 late last week.
Cash/threes has narrowed to $165/166 backwardation from $200/210 at the start of the week, while December-January has eased to $53 from $67, suggesting longs are prepared to make metal available, some said.
On Wednesday, China's State Reserves Bureau (SRB) sold about 13,500 tonnes of copper but failed to shift 6,500 tonnes, which was taken as a negative by the market, dealers said.
The SRB is likely to hold three more copper auctions to sell a total of 60,000 tonnes, dealers said.
The SRB is the focus of industry talk that a Chinese trader, possibly working on its behalf, had potentially positioned up to 200,000 tonnes of copper on a bet that prices would fall when the market hit successive highs. Talk has since suggested that the position might have been rolled over to 2006 or 2007.
China's Ministry of Finance may provide cash assistance to the SRB to help resolve the situation, dealers said.
Basemetals.com's William Adams said in a report: "The biggest development yesterday was the Chinese apparent agreement to pay their margin calls, which suggests that at least the authorities are standing by the trades.
In other metals, aluminium bounced back from early lows, in line with copper, closing at $2,060, up $20, and poised to re-test recent 10 year highs of $2,069.
Zinc was volatile, ranging between $1,590 and $1,632, closing at $1,623, down $12.
"With the CTA community believed to be already fully committed to zinc, there is likely to be only limited speculative buying interest, and then only on a break above the historically important $1,680 region," UBS analyst Robin Bhar said in a daily report.
The market hit a fresh eight-year high of $1,659 on Monday. It's July 1997 peak was $1,675. Nickel finished $50 higher at $12,625, lead was $4 lower at $975, while tin dropped $45 to $6,005.