SMM Daily Review (Oct. 26)

SHANGHAI, Oct. 27 (SMM) --

    Copper:

    SHFE copper prices climbed straightly after opening high, and SHFE three-month contract copper prices inched up to RMB 51,940/mt, with a growth rate of 1.6%. Trading volume increased constantly, and positions have jumped to a one-month high. SHFE copper prices have been close to RMB 52,000/mt despite of a lack of upward momentum and a much lower growth rate than SHFE zinc prices. If trading volume and positions continue to grow, SHFE copper prices are expected to rise further to set new highs for 2009 stimulated by LME copper prices.

    Today, in spot market, spot discounts have narrowed to RMB 250-350/mt along with soaring SHFE copper prices. Consumers increased purchases when copper prices were high upon optimistic price outlook, resulting in improved transactions, especially for registered premium copper, whose traded prices were in the RMB 51,100-51,200/mt range in the morning, and grew to the range of RMB 51,200-51,300/mt in the afternoon. Traded prices for parity copper were RMB 51,000-51,100/mt, while traded prices for hydro-copper also stood firm at RMB 51,000/mt in the afternoon, with discounts of RMB 400-500/mt. There is a consensus that copper prices will be bullish during this week in the market.

    Aluminum:

    SHFE aluminum prices opened flat, but SHFE three-month contract aluminum prices have moved above RMB 15,000/mt, soaring to RMB 15,300/mt, and the price gap between spot-month contract and three-month contract was nearly RMB 300/mt, and positions of three-month contract increased by more than 280,000 lots, and total positions increased by more than 38,000 lots, hitting a new high after China's National Day holiday.

    However, spot aluminum market was pessimistic, with discounts expanding to the range of RMB 30-80/mt, and traded prices moved around RMB 14,940/mt, up RMB 50/mt from last Friday levels. The price gap between three-month contract and spot-month contract widened around 11:00, and selected traders acquired chances for arbitrage and were active in cargo movement, especially for domestic registered aluminum, whose offers were firm above RMB 14,940/mt, stimulating the purchasing interest of downstream consumers, and transactions improved as well. As the oversupply pressure in spot market will likely hamper the upward movement for spot-month contract, the price gap between different contracts will expand as a result, and spot discounts will widen to RMB 100/mt as well. 

    Lead:

    In Shanghai lead market, SMM lead prices stood firm at RMB 15,900-16,000/mt. Offers for high-end lead were firm at RMB 16,000/mt upon the optimistic market sentiment, and the low-end traded prices consolidated around RMB 15,900/mt despite of low downstream buying interest. Traders kept their offers firm, but were still cautious about stock replenishment when lead prices were RMB 16,000/mt. Whether or not lead prices can find solid support at RMB 16,000/mt will depend on LME lead price trends and over metal environment.

    Zinc:

    SHFE zinc prices opened high and kept climbing, and SHFE three-month contract zinc prices have broken through RMB 17,000/mt, and even jumped to RMB 17,400/mt in spot trading, with a growth rate of 4% in the morning. SHFE zinc prices stood firm at RMB 17,250-17,300/mt in the afternoon, and positions increased by more than 25,000 lots, and both positions and trading volume expanded increasingly, an indication of strongest performance among base metals.

    In spot market, SMM#0 zinc prices grew by RMB 350/mt to RMB 16,300-16,400/mt, and traded prices have risen to the range of RMB 16,600-16,650/mt from RMB 16,400/mt along with jumping SHFE zinc prices. Traders were brisk, and obtained profits easily with a price spread RMB 700/mt between SHFE zinc prices and spot zinc prices. However, downstream semis producers took a cautious view towards zinc price surges, and preferred to stand on the sidelines. The situation of strong SHFE zinc prices and weak spot zinc prices will continue, and inventories at traders and downstream producers were relatively high, still having downward pressure on actual zinc prices. Spot zinc prices will continue to track SHFE zinc price trends in the short term.

    Tin:

    In Shanghai tin market, sales improved supported by continuous growth in LME tin prices, and more deals of low-end tin were done, with no significant increase in traded prices. Offers for high-end tin were firm at RMB 117,500-118,000/mt due to limited stocks held by traders, and transactions were general. LME tin prices continued to move up in the afternoon, increasing the market confidence in price hike, but spot inventories in Shanghai market were relatively high, and downstream manufacturers have almost finished stock replenishment during October, helping ease any upward movement for tin prices.

    Nickel:

    In Shanghai nickel market, Jinchuan Group reduced nickel ex-works prices by RMB 4,000/mt to RMB 132,000/mt again today, and offers for Jinchuan nickel were RMB 134,000/mt in the market. Although market transactions were weak, Jinchuan Group was keen on cargo movement through price cuts given its ample supply. Imported nickel was still traded below RMB 133,000/mt. Traders were in a dilemma due to a lack of clear nickel price trends.

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