SMM Copper Market Morning Review (2013-3-7)

SHANGHAI, Mar. 7 (SMM) – On Wednesday, the US announced mixed economic data. The US Commerce Department reported that the US factory orders dropped to USD 472.87 billion in January, down 2% but smaller than the expected decline of 2.2%. The revised US industrial orders for December slipped by 1.3% from the initial reading of 1.8%. The ADP Employer Services issued report showing that US private sector added 198,000 jobs in February, the largest increase in a year and a signal the US labor market is improving. The Fed said in its Beige Book that it may accelerate the US economic expansion appropriately due to slow recovery, while the House of Representatives approved temporary budget plan to avoid a government shutdown. Meanwhile, US equity markets continued hitting record highs. Nevertheless, as markets became more optimistic over the US economy, and since investors turned cautious towards high risk assets, a large amount of capital recently flew into US equity markets and the US dollar, which was pushed significantly higher by 0.6%. This gave pressures to copper prices. LME copper rose above the opening price following the ADP employment report, but began sliding after the release of factory orders data, with prices testing a low of USD 7,689/mt and closing USD 69/mt lower at USD 7,706/mt. In other news, the proportion of cancelled warrants to total LME copper stocks dipped below 5% as LME copper stocks continued climbing.

SMM believes that LME copper will experience no major changes from the prior day, with prices expected between USD 7,700-7,800/mt during Thursday's Asian trading session. Chinese stock markets will fluctuate at highs. SHFE copper prices are likely to increase slightly after starting down, and SHFE 1306 copper contract will hover in the RMB 56,400-56,900/mt range. Shanghai spot copper discounts are estimated between RMB 20-100/mt versus SHFE 1303 copper contract.