SMM Morning Review - 2011/12/26 Copper Market

SHANGHAI, Dec. 26 (SMM) –Market activity was extremely light last Friday due to an impact from the Christmas holiday, with total trading volumes falling to below 10,000 lots. However, upbeat economic data from the US continued to boost copper markets. US new home sales rose in November for a third straight month, and personal spending also increased in November. Besides, durable goods orders also grew higher than market expected, easing market worries over a spread of the European debt crisis. In response, US equity markets closed up by 1%, and LME copper prices broke out resistance at USD 7,600/mt and finally closed at USD 7,621/mt after stabilizing at the USD 7,600/mt level. The proportion of cancelled warrants to total LME copper inventories remained high above 10%.

The LME market is closed for the Christmas holiday today. Chinese domestic markets will continue to struggle at 2,200 points, imposing great pressures on SHFE copper prices. Nevertheless, without guidance from LME copper prices, some domestic hedged traders will opt to close positions, which will support SHFE copper prices. Therefore, SHFE copper prices will fluctuate in the RMB 55,000 -56,100/mt band during today's Asian trading hours. In spot markets, due to the last trading week at the year-end, market players with enough capitals will enter the market, and cargo-holders of low-quality imported copper will aggressively move goods, but cargo-holders of domestic copper are not expected to allow high discounts. Hence, spot copper discounts are estimated between negative RMB 520-300/mt versus SHFE 1201 copper contracts.