SMM Copper Market Morning Review (2014-4-4)

SHANGHAI, Apr. 4 (SMM) – Despite a strong aftershock in Chile, production at copper mines in north of the country were little affected. The European Central Bank left its monetary policies unchanged at Thursday’s meeting, with the euro downs sharply and the dollar rebounding. The US employment and trade data turned out weak, causing the US stock prices to edge lower, snapping a four-day winning streak. Investors were cautious prior to the nonfarm payroll report. LME copper prices tested support at USD 6,600/mt and finished at USD 6,639/mt, down USD 32/mt.

The most active SHFE copper contract prices opened at RMB 46,430/mt at Thursday’s night trading and moved between RMB 46,200-46,500/mt before ending the session at RMB 46,380/mt. Traded volumes for the most active contract fell to 150,000 lots for the night session, and positions showed limited changes.

The European Central Bank kept its key interest rate unchanged at Thursday’s policy meeting. The ECB chief Draghi said the euro zone was experiencing a mild recovery and suffered no deflation risk. He added that CPI is expected to recover in April. However, he also suggested opinions on the current inflation data have been divided among the ECB officials. There was still a possibility that the central bank may adopt unconventional policies. The euro fell back after rising initially in the wake of the meeting result.

The ISM non-manufacturing index fell short of forecast and came in at 53.1 in March, but higher than the 51.6 in February. ISM said the non-manufacturing employment gauge shot higher in March, up 6.1 points to 53.6%, fueling optimism for nonfarm payroll data. Trade deficit for the US expanded by 7.7% in February and came to a five-month high, due mainly to slipping exports.

Service PMIs for Germany, France, Italy, and the euro zone for March were all revised downward, but the euro zone composite index for the same month remained above 50 for a ninth month at 53.1, though slightly below February’s index. Markit thus estimated the single currency union may realize a 0.5% growth in the first quarter.

In China, the press release for People’s Bank of China’s Q1 meeting emphasized that China’s economic growth was still within reasonable range and the government will push on with further financial reforms, suggesting the central bank’s confidence in Chinese economy. The PBOC drained a net RMB 62 billion from the market, representing the eighth straight week of drainage. Liquidity will tighten in mid-April with commercial banks due for handing over reserves.

The US and European stocks were mixed on Thursday, with most indices in the US stock market falling. Copper and lead on London Metal Exchange performed more poorly than other base metals.

On April 4, SHFE 1407 copper contract prices are expected to move at RMB 46,000-46,600/mt, and spot copper may be quoted at premiums of RMB 180-280/mt over the SHFE current-month copper contract prices.