SHFE copper futures rise, while nickel, aluminum ease

By the close of the daytime trading session on Friday, the SHFE's most-traded copper contract for November delivery had climbed by 3.3% on week to Yuan 82,470/tonne ($11,562/t).

In contrast, the most-traded November nickel and aluminum contracts had eased by 0.2% and 0.3% from a week earlier, ending at Yuan 121,380/t and Yuan 20,745/t respectively as of 3 p.m.

The on-week gain in copper futures was largely underpinned by market forecasts of tighter global copper supply next quarter and stronger domestic consumption ahead of the National Day holiday over October 1-8, market analysts said.

On the supply side, Indonesia's huge Grasberg copper mine, supplying about 3% of global output, has faced production disruptions since September 8 following a fatal accident. On September 24, the mine's operator Freeport-McMoRan declared force majeure, warning that it may be unable to meet supply contracts. Market analysts anticipate that the disruptions to production at Grasberg will weigh heavily on global copper availability in Q4.

Domestically, sentiment in China was also supported by policy signals this week. On Wednesday, a senior official from the China Nonferrous Metals Industry Association warned that "race-to-the-bottom" competition in the country's copper smelting sector was damaging the industry. The official also said that China would introduce specific measures to regulate copper smelting capacity expansion – a move seen as potentially tightening domestic supply in the longer term, according to market watchers.

Meanwhile, seasonal restocking in China also bolstered domestic demand, as some Chinese buyers started accelerating purchases ahead of the holiday, fuelling optimism in the copper market this week.

During September 19-26, SHFE warehouse inventories of the three metals all decreased. By Friday, copper stocks in the SHFE's bonded and standard warehouses had dropped by 6.6% on week to 98,779 tonnes. Similarly, aluminum inventories had slipped by 2.4% from a week earlier to 124,626 tonnes, while nickel stocks had fallen by 2.8% to 29,008 tonnes.

Written by Iris Pang, pangjunyu@mysteel.com