SMM Copper Market Morning Review (2013-1-7)

SHANGHAI, Jan. 7 (SMM) – Federal Reserve policy makers are likely to slow monthly purchases in mortgage bonds and Treasuries, and some members expect the QE3 to end in 2013, according to the latest FOMC minutes. Previously, the Fed said to keep interest rates close to zero to stimulate economic growth and boost the labor market, and will not raise interest rates unless unemployment is 6.5% or less or inflation is more than 2.5%. The latest meeting minutes, however, depressed market sentiment, weighing down metal prices. LME copper briefly slid to the 5-day moving averages for support, down as low as USD 8,058/mt.

Later, the US announced the non-farm payrolls added 155,000 in December, close to the estimated figure of 160,000, and the unemployment in December was 7.8%, flat with the revised data for November. All these were in line with market expectations. After these news, LME copper pared some losses, and finally closed at USD 8,102/mt, down USD 47/mt. Compared with other metals, copper was resistant to drop. In other news, LME copper inventories kept rising for a 18th consecutive trading day, but the proportion of cancelled warrants has increased from 14% to 22%. In the short term, LME copper prices are expected to stay the existing price band. 

During Asian trading hours, LME copper prices will fluctuate narrowly between USD 8,030-8,130/mt due to the lack of rising momentum after profit-taking at highs. Domestic stocks market stay on an upward track, but SHFE copper market should stage little changes, and may track lower. SHFE 1304 copper prices are expected to move between RMB 58,000-58,500/mt on Monday. In the spot market, falling SHFE copper prices should allow spot discounts to narrow, but growing supply will restrict the falling pace. Spot discounts over SHFE 1301 copper contract are expected between RMB 180-80/mt.