Copper trading volume in Shanghai rose to records this week as the metal’s slump into a bear market boosted volatility on a bourse that aspires to rival the London Metal Exchange.
Aggregate trading volume on the Shanghai Futures Exchange advanced to 1.63 million lots yesterday, more than double the average over the past year, while open interest reached an all-time high of 924,712 lots on April 23, bourse data showed. One lot equals five metric tons.
While China is the biggest user of base metals and accounts for more than 40 percent of world copper consumption, trading volume on SHFE remains about 30 percent of that on the LME, based on data from the two bourses in terms of tonnage in 2012. The Shanghai exchange, which also offers futures for aluminum, zinc, lead, natural rubber, fuel oil, steel, gold and silver, said last month it was close to adding after-hours trading and Chairman Yang Maijun asked legislators to allow overseas investors to buy and sell local commodity derivatives.
“Most people in the market here are speculative retail investors, who jump in when they see a chance for big returns,” said Wang Zhouyi, head of research at Shanghai Cifco Futures Co. “They see demand as weaker than some overseas analysts think, and many expect more downside.”
The most-active contract on the SHFE advanced 1.3 percent to 51,280 yuan ($8,317) a ton at the 3 p.m. close of trade, after slumping into a bear market earlier this week when futures fell to 2009 lows. Volume was 1.34 million lots today while open interest totaled 825,886 lots.
Copper for three-month delivery in London, which slid into a bear market last week, climbed 2 percent to $7,169.50 a ton by 3:52 p.m. local time today. Data showed fewer Americans than forecast filed first-time claims for unemployment insurance payments last week, pointing to an improving labor market. A report tomorrow is predicted to show economic growth sped up in the first quarter in the U.S., the second-biggest consumer of the metal.
“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,” Pang Juan, an analyst at Jinrui Futures Co., said by phone from Shenzhen. Jinrui is a unit of China’s largest copper producer Jiangxi Copper Co.
“The exchange needs to extend trading hours and broaden the investor base to boost its status in the global markets in the long run,” Wang said.