SMM Copper Market Morning Review (2014-3-10)

SHANGHAI, Mar. 10 (SMM) – Last week, China saw the first ever corporate bond default with Chaori Solar Energy Science & Technology failing to pay bond interest due last Friday. This has triggered concerns over demand from China. The US non-farm payrolls for February beat forecast, but jobless rate rose from a 5-year low, causing the US dollar to swing largely. LME copper prices extended losses to close at an intraday low of USD 6,777/mt last Friday, down 3.86%.

SHFE 1405 copper contract prices gapped lower at RMB 48,130/mt during last Friday’s night trading, and slumped by their daily limit to touch as low as RMB 46,670/mt. The most active SHFE copper contract finished the night session at RMB 46,830/mt, down RMB 2,300/mt. Positions for the most active contract grew by 10,264 lots, and total holdings in SHFE copper increased by 69,374 lots.

China’s economic data released at the weekend came in negative. China’s trade deficit stood at USD 22.98 billion during February, a second largest since records began. Exports unexpectedly fell 18.1% YoY, well shy of a 6.8% rise expected, while its imports rose 10.1% YoY, exceeding forecasts during February. China’s February CPI rose by 2% YoY, the smallest rise in 2014, while its PPI fell by 2% YoY, down for a 24th month in a row and a bigger decline, a sign of soft demand.

US nonfarm payrolls report showed 175,000 news jobs were added to the economy during February, above the estimated 150,000, but the unemployment rate inched up to 6.7% from 6.6% during the same period. Markets previously feared the severe winter cold might affect labor market recovery, but the sharp rise in new jobs boosted market confidence. As a result, US stocks opened up a fraction.

In addition, markets were still concerned about the Ukraine crisis. The telephone call between US President Barack Obama and its Russian counterpart Vladimir Putin failed to reach any progress. The US started mulling over economic sanctions on Russia, while Russia was tightening its grip on Ukraine, threatening cuts of Ukraine’s natural gas supply.

The US dollar index edged up 0.06%, and the euro rose 0.09% against the dollar. Asian and US stocks were mixed, while European stocks were down across the board. LME gold and silver prices were down 0.82% and 2.65%, respectively. LME base metals prices slumped, with LME copper prices leading declines, down 3.86%.

On Monday, SHFE 1405 copper contract may trade at RMB 46,830-47,200/mt, and spot copper may be offered at discounts of RMB 0-120/mt against SHFE current month copper contract prices.