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SMM Copper Market Morning Review (2014-2-25)

iconFeb 25, 2014 10:17
Source:SMM
LME copper prices hit a low of USD 7,041/mt on Monday due to concerns over weakening RMB and waning demand from China.

SHANGHAI, Feb. 25 (SMM) – LME copper prices hit a low of USD 7,041/mt on Monday due to concerns over weakening RMB and waning demand from China. Later, the IFO Germany business climate was reported at a 2.5 year high in February, and the Dallas Fed manufacturing index held steady, helping commodities pare decline. US stocks rallied, with the S&P 500 closing near its historical high. Hence, LME copper prices closed at USD 7,099/mt, down USD 50/mt. Cash-to-three-month backwardation on LME copper increased to USD 63/mt.

SHFE 1405 copper contract prices started Monday’s night session at RMB 49,800/mt and dropped rapidly to test a low of RMB 49,460/mt. The April-delivery copper on SHFE then regained some losses and closed the session down RMB 80/mt at RMB 49,840/mt. Trading and positions soared, with short positions still outpacing longs.

Speculation about property slump in China has caused several property stocks to plunge by over 8% on Monday, negatively affecting Asian stock market and SHFE base metals. Several Chinese banks have suspended some property-related lending businesses, while home sellers in Hangzhou dropped prices for sales promotion, turning some domestic property tycoons pessimistic about 2014 property market. China’s National Bureau of Statistics reported YoY growth of average home price in 70 Chinese cities slowed in January for the first time in a year, which was interpreted as a result of weaker demand and tighter control over property loans.

The euro zone CPI for January was in line with expectation. Market will shift its focus on the February CPI slated for release this Friday since policymaking meeting of the European Central Bank will be held next Thursday.

US stocks increased across the board. The US dollar index dropped 0.06%, while the euro fell 0.04% against the dollar. All base metals on London Metal Exchange, except zinc and tin, closed lower.

On Tuesday, SHFE 1405 copper contract prices may move between RMB 49,500-50,000/mt, and spot copper may be offered at discounts of RMB 150-280/mt against SHFE 1403 copper contract price. Enterprises are under growing financial pressure at month’s end, and liquidity may be tightened should the PBOC conduct bond repurchase.
 

LME copper
China property market

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