Shanghai copper seen tumbling in post-holiday opening session

• Traders and brokers expected the Shanghai Futures Exchange's  most active copper contract to hit its daily down limit of 7pc on Monday.
• Market participants are unsure of when prices could rebound, as uncertainty surrounding the outbreak remains.

Shanghai copper prices could drop by their daily limit when the Shanghai Futures Exchange reopens on Monday to catch up with losses on the London Metal Exchange (LME) tied to a spreading coronavirus in China, traders and brokers said.

More than 200 people in China have died from the virus with more than 9,000 infected, most in China but cases in more than 20 other countries, prompting widespread transport curbs in China and a World Health Organization declaration of a global health emergency.

Traders and brokers expected the Shanghai Futures Exchange's  most active copper contract to hit its daily down limit of 7pc on Monday, after being closed for six sessions for a holiday. It last traded at 48,160 yuan ($6,975.67) a tonne.

"Limit down is almost certain for (ShFE) copper. Once the limit down is over, LME price may get supported as there's a very high chance import arbitrage window will be open," said a base metals trader based in Singapore.

China is the world's biggest copper consumer and speculative traders there can use Shanghai futures to get exposure to any down-shift in China's economic growth related to the virus due to the metal's extensive use in manufacturing, construction and energy.

Goldman Sachs said the virus could shave China's growth by 0.4 percentage points.

"The ShFE prices haven't had a chance to react to the outbreak of the corona virus. Arbitrage traders will make sure the two copper prices trade more or less in tandem," said Anna Stablum of broker Marex Spectron in Singapore.

Many traders and brokers viewed copper prices are now over-sold.

Benchmark LME three-month copper has lost nearly 11pc since Jan. 20, when the virus hit the headlines, and is on track for its steepest monthly fall since November 2015, on Friday, trading down 9.4pc on a monthly basis to $5,597 a tonne at 0954 GMT.

"That's a little bit over-reacting. I have confidence in our country. We have suffered this before. Although this time it is tougher, it's not unbeatable," said a Shanghai-based copper trader, referring to a Severe Acute Respiratory Syndrome outbreak in China in 2002-2003, caused by a similar virus that killed nearly 800.

However, market participants are unsure of when prices could rebound, as uncertainty surrounding the outbreak remains.

"The next two weeks are going to be crucial. If the virus goes wilder, we're in deep trouble," said another base metals trader in Singapore.