SMM Morning Review - 2012/7/18 Copper Market

SHANGHAI, Jul. 18 (SMM) – Federal Reserve (Fed) Chairman Ben Bernanke did not disclose clear signals of the third round of bond purchases in his monetary policy report to the Congress overnight and maintained statements made in June's meeting that the Fed will pay close attention to the economic trend. Bernanke's comments failed to bring pleasure to markets, as he said “The US economy has continued to recover, but economic activity appears to have decelerated somewhat during the first half of this year”. He expressed deep concerns over weakness in the labor market and predicted that progress in reducing the country's 8.2% unemployment rate "seems likely to be frustratingly slow". Bernanke's statements sent LME copper falling to as low as USD 7,576/mt. However, the US economic data showed that its industrial production expanded in June on improvement in the manufacturing sector, a reassuring sign for the world's largest economy that has looked wobbly in recent months. Coupled with the fact that China's refined copper output rose by 11.6% YoY 7% MoM to 518,000 mt in June, LME copper price declines were capped, and prices finally settled at USD 7,628/mt, a drop of USD 68/mt. In other news, spot copper offers in London for the first time in recent days turned to discounts of USD 5/mt from earlier premiums, so investors should eye the impact of the fundamentals side on copper prices. 

While investors are awaiting Bernanke's second round of statements Wednesday evening, caution will dominate markets. In this context, LME copper will fluctuate around the opening price of USD 7,650/mt during Wednesday's Asian trading hours, with prices expected between USD 7,600-7,700/mt. The Shanghai Composite Index will suffer resistance at the 5-day moving average. SHFE copper prices will start down and then hover around the previous session's settlement price of RMB 55,900/mt, and SHFE 1210 copper contract may lurch in the RMB 55,500-56,300/mt range. Spot copper offers are estimated between discounts of negative RMB 20/mt and premiums of positive RMB 80/mt versus SHFE 1208 copper contract.