SMM Copper Market Morning Review (2013-1-17)

SHANGHAI, Jan. 17 (SMM) – The World Bank lowered its global economic growth outlook Wednesday, which weighed on copper prices. The bank said early this week that the US budge battle will restrict global economic growth and pose a great threat. The World Bank predicted that the global economy would grow at a rate of 2.4% in 2013, below the previously estimated 3%. Meanwhile, China's Ministry of Commerce announced China's foreign direct investment (FDI) was USD 11.7 billion in December and dropped 3.7% YoY to USD 111.7 billion for the whole year of 2012, the decline for the first time since 2009. China increased holdings of US debts to USD 1.1701 trillion in November, up for the second consecutive month. Markets were worried that falling FDI would result in rising labor cost and that environmental concerns may further hinder China's manufacturing industry. Later, the Fed's Beige Book said as the US economy grew weakly, manufacturing sector remained sluggish in some regions, depressing the already weak copper markets. In this context, the US dollar and gold closed higher, while LME copper prices slipped all the way and tested a low at USD 7,920/mt amid decreasing positions. Nevertheless, LME copper prices narrowed some of losses at the tail of trading following US industrial output data which came in as anticipated, and finally settled at USD 7,946/mt. In other news, LME copper stocks added significantly by 16,000 mt to 349,275 mt the same day, also weighing down copper prices. 

Investors will exert caution while awaiting China's economic data due Friday. LME copper prices will face a new resistance level at USD 8,000/mt, test support at USD 7,940/mt, and largely move between USD 7,940-8,000/mt during Thursday's Asian trading session. Chinese stock markets will post weak performance. SHFE copper prices will start down before stabilizing, and SHFE 1304 copper contract will hover in the RMB 57,700-58,100/mt range. Shanghai spot copper discounts are estimated between negative RMB 150-250/mt versus SHFE 1302 copper contract.