RTRS: METALS-Shanghai, London copper off nine-month highs
* Shanghai copper down, snapping a 5-day rally
* Liquidity expected to remain high, boosting prices
By Rujun Shen and Edmund Klamann
SHANGHAI, July 21 (Reuters) - Shanghai copper retreated
from a nine-month high hit on Monday, in a pullback from the 11
percent gains made in a rally over the previous five sessions.
But the market was still bullish given an improved economic
outlook and strong liquidity, with both Shanghai and London
copper prices hitting nine-month highs in the previous session,
boosted by a weak dollar and growing confidence in an economic
recovery.
"It's normal to see such a pullback after the price broke
above key resistance. It's possible that when this round of
selling ends and prices fall, new speculative buying will
emerge," said a Beijing-based trader.
Shanghai's benchmark third-month copper futures contract
SCFc3 edged down 0.8 percent to 43,180 yuan ($6,322) a tonne
by 0220 GMT.
Copper for three-month delivery on the London Metal
Exchange MCU3 gained $50 to $5,395. It hit a 9-month high of
$5,464.75 in the previous session.
In China, strong liquidity is expected to keep the market
buoyant.
"Although the market expects China to tighten up liquidity,
the government is unlikely to squeeze too hard. High liquidity
is expected to continue in the second half, supplying
sufficient speculative money to the commodities markets," said
Liu Xu, an analyst with China International Futures.
But Liu said it would be unlikely for Shanghai copper to go
on another strong rally, as some of the copper still in bonded
warehouses after record Chinese imports in the first half could
flow back to LME stockpiles, dampening LME prices.
Shanghai's August contract was in a 200 yuan premium over
the benchmark contract for October delivery.
"It indicates that spot supply is still a bit tight. The
high copper imports in the previous months have not hit the
market," Liu said.
David Moore, commodity strategist at Commonwealth Bank of
Australia, warned that the market could still go through
periods with disappointing economic data, as a recovery in
developed countries could be slower and more hesitant than
expected.
"Certainly there's a bullish sentiment about the base
metals market. My own view is that there's a risk of a pullback
in the next couple of months, because prices for some metals,
such as copper, nickel and aluminium, rallied ahead of
prevalent underlying fundamentals," said Moore.
