SMM Copper Market Morning Review (2014-3-19)

SHANGHAI, Mar. 19 (SMM) – On Tuesday, European and US stocks increased, while weak economic data from the US drove down the dollar, lending support to copper prices. Market expects the Fed to stay on track to taper off its bond buying program at the FOMC meeting this week, with focus shifting to any change in the forward guidance to interest rate. LME copper prices remained between USD 6,450-6,510/mt, and closed at USD 6,486/mt. LME copper stocks surged by 18,375 mt, due mainly to an inflow of 20,675 mt into Antwerp’s warehouse.

SHFE 1406 copper contract prices started at RMB 44,590/mt during night trading Tuesday, and moved higher before meeting resistance at RMB 45,000/mt. The SHFE copper for June delivery finally closed the night session at RMB 44,910/mt, up RMB 110/mt. Traded volumes remained stable, while positions for the most active contract edged up 2,478 lots.

With respect to the Ukraine crisis, President Vladimir Putin signed treaties to absorb Crimea and the port city of Sevastopol into Russia. Putin said the referendum in Crimea was legal and fully complied with international law norms. In response, the US and EU planned to adopt more sanctions on Russia to further isolate the country economically and politically. The US and EU only froze assets of Russian officials thus far considering EU’s reliance on resources in Russia. Stock market increased with risk appetite on the rise, while gold dropped.

The US CPI climbed a mere 0.1% MoM in February, which was right in line with expectations. Year-over-year, prices were up 1.1%, but the data are believed to exert limited influence on result from the Fed’s policy meeting. The US housing starts decreased 0.2% to a seasonally adjusted annual rate of 907,000, lower than the 910,000 expected. However, building permits were reported at 1.018 million, well above the 960,000 forecast.

In Europe, the ZEW’s current conditions index for Germany and euro zone both picked up, but ZEW Economic Expectations declined, reflecting doubts over euro zone recovery and the impact of the Ukraine crisis.

In China, the continuous bond repurchases by PBOC indicated ample money supply. However, latest data showed China’s new forex receipts hit the lowest since last September at RMB 128.25 billion, down markedly from January’s RMB 437.4 billion. This may presage tighter liquidity conditions. Among the 70 medium and large cities in China, four of them reported falls in prices for new commercial residential buildings and nine of them saw the prices flat, according to data from the National Bureau of Statistics. Home prices in 57 were still rising. Thus, it may be premature to speculate whether housing market will collapse.

The US dollar index continued to fall Tuesday, while LME base metals rose across the board.

On Wednesday, SHFE 1406 copper contract may trade at RMB 44,700-45,300/mt. Spot copper may be offered between a discount of RMB 60/mt and a premium of RMB 20/mt against SHFE 1404 copper contract prices.