Shanghai copper fell on Monday, reversing an early rise and snapping four days of gains, as worries about rising stocks in China and the slowing pace of deliveries from London weighed on sentiment. London Metal Exchange copper stocks fell 3,175 tonnes to 522,025 on Friday, continuing the past week's trend.
And an unexpected rise in Shanghai stocks, up more than 10,000 tonnes to 38,468 tonnes or more than a third last week, is also worrying some traders. Shanghai copper for delivery in May fell 770 yuan to 29,020 yuan by the close, reversing an earlier half a percent rise. Last week it touched 30,600 yuan, the strongest in four months.
Copper on the London Metal Exchange fell $113 to $3,610 or 3 percent, and the decline in London flipped the premium for Shanghai copper to a discount. Shanghai metal traded at a discount of 33 yuan to the price in London, including China's 17 percent VAT, versus a premium of 619 yuan on Friday. Since early January Shanghai has maintained a premium of 400 to 1,000 yuan to the international market.
"Shanghai copper is correcting after the multi-month high reached last week," said Jane Jiang, an analyst at Shanghai Non-ferrous Metals Industry Association. Many consumers are willing to build stockpiles at prices below 29,000 yuan," she said. In the West, investors are trimming bullish views across commodity markets. The net long position in US commodities fell by nearly a third over the last two weeks, data released on Friday showed.
But analysts warned about reading too much into the data. "More surprising than the CFTC numbers is the resilience we are seeing in LME metals, especially copper. Even today after the weak macro economic news in the past week," said David Moore, Commodities strategist at Commonwealth Bank in Sydney. Analysts and traders are looking for the refined copper component of the data to surpass December's record of 211,527 tonnes.
Lead rose almost 1 percent to $1,225, and hit $1,229 in electronic dealing, its highest since January 7. "Prices jumped $30 in the space of abou 12 minutes. The price moved in very small volume, one or two lots at a time. Technically, lead looks quite strong and I suspect when London woke up they put a couple of orders through." a dealer in Sydney said.
OTHER METALS TICKED LOWER Zinc and nickel both fell around 1.5 percent to $1,208 and $9,700 respectively. Moore said room remained for further falls given the weak macroeconomic environment and falling cost curves as high cost productions shuts. But he added: "Aluminium, nickel and zinc have all seen forced production adjustments but the scope for further big falls is more limited."