Shanghai copper eased over 1 percent on Wednesday on London Metal Exchange losses and heavy domestic stockpiles, with LME nickel down more than 3 percent in the previous session.
The most-active August contract on the Shanghai Futures Exchange fell 780 yuan to 66,480 yuan ($8,700) a tonne. "The drop on London Metal Exchange nickel hit participants' confidence on copper, while rising copper stockpiles in China also limited room for gains," said analyst Yang Jun of China Futures.
London Metal Exchange nickel was up $50 at $46,250, after touching a low of $46,050 in early trade on Tuesday, with stocks in London Metal Exchange (LME) warehouses rising by some 6 percent, or 504 tonnes, to 8,460 tonnes.
Yang said he did not expect any rapid falls for copper in London and Shanghai due to a high premium for the metal and steadily falling inventory in London. London Metal Exchange (LME) copper stocks fell by 600 tonnes to 123,300 tonnes on Tuesday, the lowest since late October 2006 and down by some 40 percent since the beginning of February.
The premium for cash metal over three-month copper in London has nearly doubled to $100 from $54 in mid-May, reflecting a tighter market. Three-month copper was at $7,530, down $10. Potential strikes in Mexico, where workers threatened to strike at nine mines and processing plants owned by Group Mexico, including the Cannier copper mine, supported the market.
Traders also said a lack of progress in contract talks at Collahuasi, one of the largest copper mines in Chile, was helping to underpin prices. Shanghai August aluminium was down 30 yuan at 19,910 yuan a tonne, while the three-month aluminium contract in London slid $12 to $2,791.
The focus was on the large option for June expiring on Wednesday. "The market is likely to remain watchful in case there is a last minute dash for the 17,200 lots of $2,900 strikes," William Adams at BaseMetals.com said in a report. With the market almost $100 below that strike price, however, it was unlikely they would be exercised, Barclays Capital analysts said.