SMM Morning Review - 2012/1/19 Copper Market

SHANGHAI, Jan. 19 (SMM) –LME copper prices continued to fluctuate Wednesday. Despite limited bargain buying from Chinese investors due to the approach of Chinese New Year, Spanish bond auction improved overnight. Although there were uncertainties in the result of Greek debt negotiations, the International Monetary Fund (IMF) said it hoped to raise the lending capacity to help ease the current European debt crisis, slowing market worries over the euro zone and pushing up the euro. Combined with support from the uptick in the US economic data later, LME copper prices finally ended at USD 8,257/mt, a slight increase of USD 60/mt. Copper stocks at LME warehouses have decreased to a 13-month low, which will shore up copper prices over the near term.

The US House of Representatives rejected the proposal of Obama Administration's debt limit this morning, imposing some pressures to today's copper prices. Besides, the US dollar index will make corrections following last night's significant declines, but any downside room will be limited, leaving upside resistance unchanged for LME copper. Nevertheless, market concerns over the euro zone alleviated somewhat, and markets believe the IMF will take effective measures to solve the region's debt problems, which will bolster copper markets. As such, LME copper prices will move between USD 8,150-8,280/mt during today's Asian trading hours. Chinese stock markets will open higher owing to a lift from US equities overnight, but the withdrawal of money will continue. Hence, SHFE copper prices will open slightly higher with persistent resistance at RMB 60,000/mt, while SHFE 1204 copper contract prices will fluctuate in the RMB 58,800 -60,100/mt band. Spot copper discounts are estimated between negative RMB 600-450/mt.