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SMM Morning Review - 2012/5/17 Copper Market
May 17,2012 09:49CST
smm insight
Source:SMM
LME copper will fluctuate feebly between USD 7,620-7,750/mt during Thursday's Asian trading session, and SHFE 1208 copper contract should move in the RMB 54,500-55,500/mt range.

SHANGHAI, May. 17 (SMM) – German Chancellor Angela Merkel and new French President Hollande said Wednesday that they hoped Greece could continue to stay in the euro zone area, which eased market risk aversion. However, there were rumors later that the European Central Bank (ECB) had suspended refinancing operations for some debt-stricken Greek banks, which ignited investor fears again and caused risky assets to suffer sell-offs. The US then announced mixed economic figures, showing housing starts rose by 2.6% in April from the previous month. Industrial output in the US also increased in April, but March's industrial output data was revised down. Besides, building permits for April fell, which depressed investor optimism and led US equity markets to close lower. Furthermore, the US dollar continued to consolidate at 81 for a safe-haven, so crude oil and gold prices closed down by more than 1%. In consequence, LME copper extended the losing streak in the US and European trading session Wednesday, lurching between USD 7,630-7,730/mt and finally ending at USD 7,650/mt, a loss of USD 105/mt. In other news, the proportion of canceled warrant to total LME copper stocks slid to 19.15%, which had a weakening support for copper prices.    

An ECB spokesman responded to overnight rumors this morning, saying the ECB will continue to bolster the Greek banking industry, despite the country's unclear prospects. This will help the euro stop falling. Moreover, LME copper needs to make corrections following significant declines, so any downside room will be limited. As such, SMM expects that LME copper will fluctuate feebly between USD 7,620-7,750/mt during Thursday's Asian trading session. Chinese stock markets will fluctuate narrowly. SHFE copper will open flat before lurching around RMB 55,000/mt, with the still increasing selling pressures for SHFE forward copper contracts. SHFE 1208 copper contract should move in the RMB 54,500-55,500/mt range. In spot markets, as the SHFE/LME copper price ratio improves gradually, cargo-holders of imported copper will step up sale volumes. Hedged copper cargo-holders will also move goods due to prevailing profit margins, so market supply should remain sufficient. Downstream producers will buy at the lows, allowing a relatively active market. Spot copper premiums are estimated to remain high between positive RMB 80-150/mt versus SHFE 1206 copper contract.

 

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