[Cu] SMM Morning Review - 2009/11/12 Copper Market

SHANGHAI, Nov. 12 (SMM) -- A series of macro economic data released by China on Wednesday were bullish, raising market risk preference, and the US dollar index dropped below 75 as a result, which helped push up commodities prices. However, Mervyn King, Governor of the Bank of England, were open-minded about central bank's move to inject more funds in economic development and stressed the benefits from a weaker pound, resulting in slump in the US dollar. In addition, the US Treasury Secretary Timothy Geithner's remarks to maintain strong US dollar helped drive up US dollar above 75, which pares copper price gains.

    However, market response from China's copper imports in October was not very strong. China's imports of copper and copper alloy in October dropped by 34% MoM, and imports of refined copper are estimated at 140-150 kt, down nearly 50% compared to September levels of 280 kt. Imports of scrap copper slumped as well. In the mean time, LME copper inventories increased by 1,657 mt, bringing total inventories to 397,325 mt. approaching to 400 kt.

    Declines in copper imports and increases in SHFE copper inventories indicate Chinese consumption slipped during 4Q, which will exert downward pressure on copper prices if the US dollar remains stable. However, if copper imports remain sluggish, trading inventories will stay low, which will help increase copper prices and raise the SHFE/LME copper price ratio in the medium term. SHFE copper prices are expected to remain high today, and spot discounts will narrow gradually as the delivery date nears.

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