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SMM Copper Market Morning Review (2014-3-17)
Mar 17,2014 10:17CST
price review forecast
Source:SMM
As some bargain hunters entered the market last Friday, LME copper prices found support at USD 6,400/mt level for the third straight day.

SHANGHAI, Feb. 20 (SMM) – As some bargain hunters entered the market last Friday, LME copper prices found support at USD 6,400/mt level for the third straight day, testing USD 6,500/mt. Both US PPI and March University of Michigan’s CCI fell short of market expectations and on the month, pushing down US stocks and the US dollar index. LME copper prices dropped slightly in response, and finally closed at USD 6,463/mt, up nearly 1%. Crimea voted 95.5% to join Russia in referendum. The White House declared President Obama pointed out in the talk with Russian President Putin that Crimea vote will not be admitted by the US and international community. But a statement from the Kremlin said Putin pointed out that the vote is completely in line with the International Law. A 7.0 magnitude earthquake shocked northern cost of Chile this morning, which will prompt longs to enter the market.

As LME zinc prices leveled out overnight, SHFE three-month copper contract prices opened high at RMB 44,860/mt, but failed to break through RMB 45,000/mt, and finally closing at RMB 44,590/mt, up RMB 240/mt. Trading volumes remained around 400,000 lots, and total positions increased by 330 lots. Copper prices are expected to continue to rebound today due to slow selloffs.

The outcome of the Crimean referendum ending on March 17 showed more than 90% voted to join Russia. In response, US President Barack Obama emphasized in a telephone call with his Russian counterpart Vladimir Putin that the US and international community will never recognize the outcome of the referendum since it went against Ukraine's constitution. President Obama added the US and its European allies are prepared to make Russia pay higher prices for its role in the situation. However, even on the eve of the referendum, Russia had taken military actions in eastern Ukraine out of Crimea. In this context, the geopolitical crisis in Ukraine is unlikely to be resolved thoroughly in the short term given strong stances of the three parties.  

US February PPI fell by 0.1% MoM and 0.9% YoY, respectively, missing January's 0.2% and 1.2%. The University of Michigan's consumer sentiment index was reported at 79.9, undershooting the 82 forecast. These downbeat economic data put a lid on US stocks and the US dollar index.   
The Chinese authorities recently highlighted a series of problems in the process of urbanization, and set the urbanization rate at around 60% for permanent resident population and at about 45% for household population. More than RMB 1 trillion will be spent on rebuilding shanty towns. In addition, the daily swing for the yuan trading against the US dollar will be widened to 2% from 1% since March 17 in foreign exchange markets, a sign of further progress in foreign exchange rate reform.     

European and US stock indexes fell across the board. LME base metals prices, except for LME zinc prices, closed higher.

LME copper prices look set to rebound, moving between USD 6,450-6,540/mt, and SHFE 1406 copper contract prices will rebound to RMB 44,800-45,200/mt. Today is the last delivery day for SHFE 1403 copper contracts, with SHFE 1404 copper contract prices RMB 100/mt above SHFE 1403 copper contract prices. Spot premiums against SHFE 1403 copper contract prices will between RMB 0-110/mt.
 

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