Correlation Analysis Among The LME, SHFE Copper Futures Price And The Native Copper Spot Price

Since2002, the importing amount of copper ore and refined copper has mounted up sharply from2.07million tons to6.13million tons, the extent reaching3times. As of2009, china’s copper consumption reached18.2million tons, accounting for29.12%of the world consumption. However, the global copper prices have sharply fluctuated and the competition of copper pricing among the main countries has become more and more intense. As one of the main copper-importing countries, what role can china play in the international copper market as for the right of copper pricing? Does it play a leading part, a participant or only a receiver? What kind of the price influence relation exists in the international copper market?This paper aims at the analysis of price relationship among the LME, SHFE copper futures price and the native copper spot price, which is to study if china’s copper futures price is significantly positively correlated with international copper futures price, and if these three markets have the long equilibrium relationship.Moreover, what kind of price influence relationship and information transmission relationship exist among these three markets.On the basis of the above objectives, this paper applies the VAR modal to study the relationship among the LME, SHFE copper futures price and the native copper spot price by virtue of Johansen co-integration test,Granger causality test,Impulse response function and Variance decomposition method.The study shows that the prices of these three markets are significantly correlated with each other and these three markets have the long equilibrium relationship; the short term the price could departure,however it can be corrected in the long term. Therefore, the related information can be conducted rapidly and china’s copper futures market has become one of the world futures market.The price changes of Shanghai’s copper futures market can not become the reasons of the London’s.It is concluded that LME plays a key role in the pricing process of copper futures market and SHFE has a certain influence on this process.This paper applies the VAR modal to study the relationship among the LME, SHFE copper futures price and the native copper spot price.However,the influencing factors of forming the price ralationship have not been deeply analyzed,which needs futher study.