SMM Copper Market Morning Review (2014-3-21)

SHANGHAI, Mar. 21 (SMM) – On Thursday, market continued to digest the Fed’s policy decision, with metals, stocks and bonds all slipping. Concerns over China’s credit and economic growth undermined interest in buying metals. Besides, the spot yuan weakened to a low in nearly one year, kindling worries about declines in China’s raw material imports, including copper and crude oil. Both the US and Russia announced the sanctions list, and S&P slashed its rating for Russian outlook to “negative”, also weighing market on. However, the positive Philly Fed manufacturing index and Leading Economic Index indicated the country will strengthen after a weather-induced slowdown. LME copper prices tested support at USD 6,400/mt before closing at USD 6,452/mt, down USD 127/mt.

SHFE 1406 copper contract prices started at RMB 44,900/mt during night trading of Thursday and touched a low of RMB 44,720/mt, with resistance at RMB 45,300/mt. The most active SHFE copper contract finished the night session at RMB 45,190/mt, up RMB 280/mt. Traded volumes remained at 390,000 lots, and positions dropped 1,440 lots.

The US dollar index rose above 80 after the Fed signaled interest rate increase. As for the Ukraine crisis, US President Obama signed executive order to impose sanctions on key sectors of the Russian economy, including defense, energy, mining and financial services, placing great economic pressure on Russia. However, Russia showed no signs of backing down, promising to respond adequately to every hostile thrust.

With respect to economic indicators, existing properties in the US fell 0.4% to a 4.6 million annual rate, down for a 19th straight month and hitting the lowest since July 2012. Initial jobless claims for the week ending March 15 were 320,000, up 5,000 from a week earlier, but remaining below the 322,000 expected.

The spot yuan weakened 816 basis points against the dollar after the band-widening by the PBOC, meaning the Chinese currency has depreciated by 2.7% this year, helping curb forex receipt growth and adding to selling pressure on finance-driven copper.

China’s total electricity consumption hit 383.5 billion kwh in February, up 13.7% YoY, and that for the first two months grew by 4.5% to 824.3 billion kwh.

Most indices on European and US increased, while LME base metals dropped across the board.

On Friday, SHFE 1406 copper contract may trade at RMB 44,500-45,300/mt. Spot copper may be offered between at premiums of RMB 0-80/mt against SHFE 1404 copper contract prices.