SMM Copper Market Morning Review (2013-3-11)

SHANGHAI, Mar. 11 (SMM) – US non-farm payrolls added by 236,000 in February last Friday, significantly higher than market expectations and pushing the latest unemployment rate down to 7.7%, the lowest record in the past 4 years. This indicated that the US economy has gained strong momentum to withstand the negative impact from tax hikes and government spending cut. In this context, the Fed will continue its ultra-loose monetary policy. Meanwhile, the US wholesale inventories jumped 1.2% MoM in January, also above 0.4% predicted by economists. A set of encouraging data lifted markets sentiment and caused the Dow Jones Industrial Average to stand above new highs for four consecutive days. European stock markets also closed with a gain of 0.8%, and hit a fresh high in at least four and a half years for the second time in one week. The US dollar index, however, rebounded sharply to 83, which weighed on copper prices. Moreover, China reported sluggish copper import data, while LME copper stocks already exceeded 500,000 mt. As such, LME copper prices drifted down but were well supported at USD 7,720/mt on strong US data, closing virtually flat at USD 7,749/mt.

Despite favorable US economic data, China's CPI, PPI, industrial added value and retail sales figures released at the weekend were negative, which will depress copper markets. Therefore, SMM believes that LME copper prices will move between USD 7,720-7,790/mt during Monday's Asian trading hours. Chinese A-share market will fall. SHFE copper prices will start slightly down, and SHFE 1306 copper contract will hover in a range of RMB 56,500-56,900/mt. Shanghai spot copper premiums are estimated between RMB 0-100/mt versus SHFE 1303 copper contract.