SMM Morning Review - 2011/8/4 Copper Market

SHANGHAI, Aug. 4 (SMM) –The strike overnight at Chile's Escondida copper mine had signs of growing, meanwhile the Institute for Supply Management (ISM) announced the US non-manufacturing index for July was 52.7, well below the estimated 53.6 and June's 53.3, and also the lowest since February 2010. The US Commerce Department announced factory orders slid 0.8% in June, higher than market expectations of 0.7%, and declining for the second time in three months, and durable goods orders in June fell 1.9% after adjustments, lower than May's 2.1%. Almost all economic results were weaker than expected and well above the previous figures, triggering trader's worries over the US non-farm payrolls to be announced on August 5th by the US Labor Department. Coupled with a drag from the poor US manufacturing data released a few days earlier and last Friday's weak readings on the second-quarter economic growth in all countries, investor's pessimistic expectations towards a prolonged  US economic gloom made them overlook supply shortfall concerns caused by Chilean strikes, and even a low US dollar index at 73.85 couldn't provide support for copper prices. As a result, copper prices in New York and on the LME market fell to the lowest since July 2011, with prices breaking through USD 9,600/mt and reaching a low level at USD 9,522/mt. Finally, LME copper prices closed at USD 9,549/mt, significantly down more than USD 100/mt.      

During Thursday's Asian trading hours, crude oil prices and copper prices on the Comex rallied from lows in the morning business, and the US dollar index is expected to move lower affected by QE3 rumors and its movements Wednesday. The euro will mainly fluctuate. In this context, LME copper prices will move higher, with prices expected between USD 9,550-9,650/mt. In domestic market, stock markets will not be optimistic after closing slightly higher and experiencing a drop in trading volumes yesterday, which will restrict the rally for SHFE copper prices. SHFE three-month copper contract prices will open lower today, and test RMB 72,000/mt, and gradually stabilize after fluctuating, tracking LME copper prices. SHFE 1110 copper contract prices will move in the RMB 71,300-72,200/mt range.