Copper prices fall, with rise in supply expected to continue

Shanghai Futures Exchange (SHFE) copper prices declined on Friday, amid a rise in copper supply.

"A number of shorts are setting up their positions given the demand and supply situation in China … Smelters now have bigger incentives to produce refined copper as treatment charges have been rising quickly," Che Hongyun, chief metals analyst at Beijing-based Galaxy Futures, was quoted as saying in a report by London-based metal information portal Metal Bulletin on Friday.

Domestic refined copper production reached 4.93 million tons in the period of January to August this year, an increase of 11.17 percent year-on-year, according to data released by the National Bureau of Statistics (NBS) in September. In August, refined copper production reached 680,128 tons, up 20.16 percent year-on-year, and a rise of 7.4 percent compared to the previous month, the NBS data showed.

Production of refined copper is expected to remain high this year, according to a report from Nanjing-based Nanzheng Futures Co (NF) on Friday.

Normally, September sees a rise in copper consumption, but this did not transpire this year, according to the report from NF, partly because major copper consumers such as home appliance manufacturers have been performing poorly.

Also, investment growth in the real estate industry continues to slow, and the sector's consumption of copper will drop further, the report from NF said.

The relatively low consumption of copper will not support the currently high production, and the imbalance between supply and demand will further expand in the future, the report from NF said.

The most-traded copper contract for December ended at 47,240 yuan ($7,705) per ton on the SHFE on Friday, down 540 yuan or 1.13 percent from Thursday. The trading volume climbed 9,494 lots on Friday from Thursday's 474,894 lots.