SMM Morning Review - 2011/9/22 Copper Market

SHANGHAI, Sept. 22 (SMM) –Some investment agencies Wednesday cut forecast for global economic growth in 2012, including that both French bank BNP Paribas and Barclays Capital downgraded expectations for copper prices and other industrial metal prices. Besides, markets were worried the European debt crisis may cause to freeze the credit markets. In this context, LME copper prices continued to be pressured down in earlier hours. Later the evening, the Federal Reserve (Fed) announced that it would purchase USD 400 billion of 6 to 30-year long-term bonds and sell USD 400 billion of short-term bonds (3 year and less). The Fed also said to maintain interest rates between 0-0.25% unchanged. Following the announcement, the US dollar surged and touched 77.86, which caused LME copper prices to fall further and set a new yearly low at USD 8,235/mt. However, Freeport-McMoRan Copper & Gold Inc. (FCX) later said its production would be hurt by the ongoing labor dispute at its Grasberg gold and copper mine in Indonesia. A 30-day strike by unionized miners began in September 17th, and they adopted measures of limiting mining, milling and shipping activities, causing losses in copper output estimated at 3 million pounds for every day of the ongoing strike, which was positive for copper prices. Meanwhile, some buying force also appeared after LME copper prices touched the lows. Therefore, LME copper prices strongly rebounded at the tail of trading, with prices closing at USD 8,337/mt, slightly up USD 88/mt.       

Standard & Poor's (S&P) again cut the credit ratings of seven Italian banks this morning, helping the European debt issues escalating. In this context, the euro will move lower, while the US dollar will move towards 78, weighing down LME copper prices, which are trying to find support at the low-end prices in 2010. Therefore, LME copper prices will move between USD 8,130-8,240/mt during today's Asian trading hours. Chinese stock markets closed significantly higher due to outside factors on the previous trading day, but are unlikely to rebound again today, with expectations of fluctuating at high levels, which will support SHFE copper prices. HSBC today will announce HSBC's manufacturing PMI data for September, and SHFE copper prices will remain weak after a low open, while SHFE 1112 copper contract prices will fluctuate in the RMB 61,200-62,200/mt band.