Metals News
SMM Morning Review - 2012/4/26 Copper Market
smm insight
Apr 26,2012

SHANGHAI, Apr. 26 (SMM) – The European macroeconomic news front was comparatively calm on Wednesday. As the US announced its industrial product orders were the weakest in March in the past three years, LME copper prices experienced a round of rapid slides in the session. At the tail of trading, the US Federal Reserve (Fed) announced to keep the low interest rate unchanged, meaning that QE3 measures are unlikely for a longer period of time and that the extension of selling short-term bonds and buying long-term ones is also impossible. Nevertheless, meanwhile, Fed policymakers expected moderate economic growth in coming quarters and acknowledged "some signs of improvement" in the housing market, believing the US economic recovery should "pick up gradually" later. In response, US equity markets closed with strong gains, helping LME copper prices break resistance at USD 8,200/mt before climbing to as high as USD 8,225/mt. The US dollar lost 79, which led LME copper prices to hold onto gains and finally end at USD 8,205/mt. In other news, LME copper stocks were reported to decrease by 475 mt to 256,400 mt on Wednesday, near the lowest level in September 2008, while the proportion of cancelled warrants to total LME copper stocks already exceeded 42%, registering an eight-year high. Besides, spot copper premiums in London remained high at USD 95/mt, implying that long investor activity on the LME is far from ending. The struggle between long and short investors will continue so long as negative macroeconomic news exists, and the capital situation will decide copper price trends over the mid-to-long term.

Speculators should become more rational after markets absorbed Fed's comments on the previous day, while investors will keep cautious ahead of another round of Italian bond sales on Thursday. Furthermore, the US dollar will win support at 79 following considerable declines or may experience strong rebounds, which will cap upside room for copper prices. As such, SMM anticipates LME copper prices will move between USD 8,120-8,220/mt during Thursday's Asian trading session. Chinese stock markets will move above 2,400. SHFE copper prices will fluctuate in a narrow band after a high open, with resistance at RMB 58,000/mt, while SHFE 1207 copper contract prices will lurch in the RMB 57,800-58,500/mt range. Spot copper discounts are estimated between negative RMB 80-20/mt versus SHFE 1205 copper contract.

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