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SMM Morning Review - 2012/5/15 Copper Market
May 15,2012 09:33CST
smm insight
LME copper will move between USD 7,780-7,890/mt during Tuesday's Asian trading session, while SHFE 1208 copper contract will hover in the RMB 55,100-56,000/mt range.

SHANGHAI, May. 15 (SMM) – The US and European markets continued to digest the news that China's central bank lowered the reserve requirement ratio (RRR), which, however, heightened market worries over the country's slow economy. Later, the euro zone leaders said that if Greece wants to stay in the region, it must approve the austerity measures. Nevertheless, owing to political impasse and unyielding statements from the left-wing leaders there, market feared chances were increasing that Greece would exit the euro zone. This caused Greek stock markets to plunge by 4.6%. The unexpectedly falling industrial production in the euro zone for March also added to market pessimism. Coupled with climbing Spanish and Italian bond yields and expanding budget deficit, investors were worried over the slowing global economy. Besides, Moody's began its promises to cut credit ratings for 26 Italian banks, which sent the euro down sharply by 0.7% but helped the US dollar climb to a high of 80.732. Commodity prices thus fell across the board, with gold closing down by 1.5% and crude oil losing USD 95/bbl. US equity markets closed with a loss of more than 1%. LME copper prices also slid unilaterally, falling to as low as USD 7,813/mt before finally settling at USD 7,825/mt, a considerable loss of nearly 2.2%. In other news, the proportion of canceled warrants to total LME copper stocks decreased again to 20.49%, and spot copper premiums in London narrowed to USD 60/mt, an indication long investor activity was having a weakening support for copper prices.

Markets will continue to absorb negative economic data and news Monday, so the euro is unlikely to rally after losing key price marks. LME copper prices therefore are expected to move between USD 7,780-7,890/mt during Tuesday's Asian trading session. Chinese stock markets will further move lower following Monday's drops, in addition to poor performance in US equity markets. Hence, SHFE copper prices will keep fluctuating feebly after a down open, testing support at lower prices, while SHFE 1208 copper contract prices will hover in the RMB 55,100-56,000/mt range. In spot markets, as Tuesday is the last trading day for SHFE 1205 copper contract, and since copper prices are expected to fall appreciably, spot copper premiums will inch higher. But an increase in hedged copper owing the plunging copper prices will cap spot copper premium increases somewhat. Spot copper premiums are estimated between positive RMB 20-120/mt versus SHFE 1205 copper contract.

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