SMM Copper Market Morning Review (2013-3-1)

SHANGHAI, Mar. 1 (SMM) – On Thursday, the US economic data came in mixed again. The US initial jobless claims dropped by 22,000 to 344,000 last week after seasonal adjustments, well below economists' estimate of 365,000. The Institute for Supply Management announced that Chicago PMI rose unexpectedly to 56.8 in February from January's 55.6, a fresh 11-month high, in strong contrast with market anticipation the data would slip to 54.5. Nevertheless, US gross domestic product expanded at a 0.1% annual rate in 4Q 2012, missing the expected 0.5% increase. Meanwhile, the US automatic spending cut will take place on Friday and caused US equity markets to close down. Investors also awaited releases of manufacturing data from China, the US and France as well as US non-farm payroll report due on Friday, which helped the US dollar close significantly higher amid rising risk aversion. As a consequence, LME copper prices gradually retreated to around USD 7,800/mt as investors closed positions, and finally closed at USD 7,816/mt, a loss of USD 48/mt. In other news, the proportion of cancelled warrants to total LME copper stocks slid to 5.73% the same day.

SMM believes that LME copper will fluctuate near current levels but has the possibility of rising, with prices between USD 7,820-7,920/mt during Friday's Asian trading hours. Domestic stock markets will hold flat. SHFE copper prices may recoup some of declines after opening slightly down, and SHFE 1306 copper contract will move in the RMB 57,400-57,900/mt range. In China's spot markets, cargo-holders will become less eager to move goods for cash in early March, but downstream producers will replenish stocks at lows. In this context, Shanghai spot copper discounts will hold between RMB 150-250/mt versus SHFE 1303 copper contract.