Shanghai copper flirts with four-year peak

MELBOURNE — Shanghai copper came within a whisker of its highest in four years on Monday after a rally in steel unleashed short-covering across metals, before prices quickly retraced in line with a stronger dollar.

“The recent driver of prices and demand in China has been the iron ore and steel rebar prices ... which tend to lead to general buying of all the industrial metals,” said Kingdom Futures in a report. “Buyers seem to once again be positioning themselves for an expected improvement in demand, and thus prices, as we move forward into September and October.”

Shanghai Futures Exchange (ShFE) copper surged more than 1% to top out at 51,060 yuan, just shy of February’s 51,200 yuan high, a breach of which would take prices back to levels last seen in April 2013. ShFE copper last traded flat at 50,260 a ton.

London Metal Exchange (LME) copper was down 0.20% at $6,361.50 a ton by 0619 GMT, having earlier jumped to $6,430.50, less than $10 below its most recent-two year high. Volumes were more than double usual levels at more than 7500 lots.

“The US jobs was definitely a positive surprise from my perspective,” said one US based trader, adding that the dollar was likely to strengthen from here. “(Copper) is a screaming short right now.”

US employers hired more workers than expected in July and raised their wages, signs of labor market tightness that likely clears the way for the Federal Reserve to announce a plan to start shrinking its massive bond portfolio.

ShFE aluminum rallied more than 3% to hit the highest since January 2013 on prospects of supply shutdowns in top producer China.

Premiums to obtain physical delivery of copper and zinc either in Shanghai or enroute to Shanghai fell, reflecting falling physical demand due to high prices. Nickel premiums hit the highest in two years, due to robust financing demand.

LME nickel rallied 1%, chasing steel.

German industrial production unexpectedly fell for the first time this year in June.

Hedge funds and money managers boosted their net long position in COMEX copper to a record high in the week to Aug. 1 US Commodity Futures Trading Commission data showed.

The LME is seeking agreement from its network of metal warehouse owners to cut rents charged for storage, which could boost the amounts of metal registered under LME warrant and improve transparency. —