SHFE Copper Volume Rises to Record as LME Competition Heats Up

Copper’s aggregate trading volume and open interest in Shanghai rose to records as prices fell to the lowest in three and a half years, amid competition to replace London as the world’s largest metals marketplace.

Trading volume on the Shanghai Futures Exchange advanced to 1.63 million lots yesterday, while open interest reached an all- time high of 924,712 lots on April 23, bourse data showed. One lot is equal to five metric tons. The most-active contract slumped to 48,460 yuan ($7,854) a ton on April 23, the lowest level since October 2009.

China, the biggest consumer of the metal used in cables and wires, accounts for more than 40 percent of world consumption. Trading volume was about 30 percent of that on the London Metal Exchange last year in terms of tonnage, data from the two bourses showed. The Shanghai exchange has been seeking to attract overseas investors, extend trading hours and expand its warehouse networks to become a more global market.

“The price slump is another showcase that night-trading hours are urgently needed,” Pang Juan, an analyst at Jinrui Futures Co., said by phone from Shenzhen. “The record open interest and trading volumes indicate domestic market participants’ diverged views on market outlook.”

Long Positions

The most-active contract on the SHFE gained 1.3 percent to 51,280 yuan a ton at 11:30 a.m. local time, poised to lose 6.5 percent this month, the most since May 2012.

Long-position holders believe that demand isn’t as bad as it seems, while short sellers’ pessimism has been enhanced by losses in gold, said Bonnie Liu, an analyst at Macquarie Group Ltd. Gold has lost 9.6 percent this month.

“There may be some tentative copper buying from speculators and for hedging needs from manufacturers, while everyone else still bets on rising supplies and tepid demand,” Jinrui’s Pang said. Jinrui is a unit of China’s largest copper producer Jiangxi Copper Co. (358)

The Shanghai bourse is close to adding night-trading hours, an official said March 13. Chairman Yang Maijun proposed to the nation’s top legislature to allow overseas investors to trade local commodity derivatives in March. The exchange trades copper, aluminum, zinc, lead, natural rubber, fuel oil, steel, gold and silver futures.

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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