SMM Copper Market Morning Review (2015-1-26)

SHANGHAI, Jan. 26 (SMM) – China’s manufacturing sector remained stagnant in January and companies were forced to cut prices to secure new orders, compounding worries over the country’s deflationary risks.

The euro was pummeled by the European Central Bank’s 1 trillion euros bond-buying program, sending the US dollar up to the highest versus the euro since September 2003. A stronger dollar exerted considerable pressure on base metals markets.

Moody’s, a credit rating agency, has cut prospect for world’s base metals sector from stable to negative status, hurting market sentiment.

As such, three-month copper on the London Metal Exchange sank to a 5.5-year low of USD 5,502/mt and closed down 2.8% at USD 5,521/mt last Friday, down a sixth week in a row.

Copper for April delivery on the Shanghai Futures Exchange, the most active contract, slid to RMB 40,030/mt after opening at RMB 40,420/mt in last Friday’s night session and ended down RMB 850/mt, or 2.08% at RMB 40,060/mt. Positions for the SHFE 1504 copper contract gained 3,010 to 305,032, while trading volumes totaled some 200,000 lots.

LME copper is set to hover at USD 5,430-5,520/mt, while the most active SHFE 1504 copper contract is expected to move at RMB 39,300-40,300/mt on Monday. Spot copper in China should trade at a RMB 0-60/mt discount to the SHFE 1502 copper contract.