SMM Daily Review (Nov. 11)

SHANGHAI, Nov. 12 (SMM) --

    Copper:

    SHFE copper prices opened flat, and moved stably in the morning, but later plunged after the National Bureau of Statistics (NBS) released China's output of base metals in October and China Customs released China's import and export of copper and aluminum in October at noon. SHFE three-month contract copper prices fell from RMB 51,000/mt to RMB 50,910/mt, and the trading volumes increased, but positions declined, while SHFE spot-month contract copper prices also dipped to RMB 50,450/mt from RMB 50,500/mt, and closed at RMB 50,490/mt.

    In spot market, spot discounts narrowed further, and premiums for premium copper ranged from RMB 0/mt to RMB 30-50/mt. Market supply was mainly domestic copper, and declined further today. Supply of parity copper was also limited, narrowing discounts to RMB 0/mt from RMB 50/mt, with deals mainly in the RMB 50,550-50,650/mt range in the morning. Traded prices fell slightly to the range of RMB 50,450-50,600/mt in the afternoon along with plunged SHFE copper prices, with high-quality copper unavailable.

    According to China Customs, China's imports of copper and copper semis were 263,109 mt during October, down 34% MoM, in line with current spot market conditions. As large volumes of imported copper ordered during July and August arrived at domestic markets in September, making copper imports in September high, but importers have experienced losses due to low SHFE/LME copper price ratio since September, so copper imports in October dropped significantly as a result.

    According to NBS, China's output of refined copper was 399 kt during October, up 1.1% MoM, an indication of sufficient supply in domestic market. In this context, China's copper imports will fall further if the SHFE/LME copper price ratio remains low, and spot traders will narrow discounts and reduce cargo movement as a result, which will help support spot copper prices. Therefore, market players in domestic and foreign markets took different views on China's economic data today, and special attention should be paid to the impact from China's economic news on LME metal markets.

    Aluminum:

    SHFE aluminum prices opened low, and moved steadily in the morning, but plunged to RMB 15,110/mt at noon and found solid support at RMB 15,100/mt, and more long players withdraw from the market. SHFE spot-month contract aluminum prices stabilized at RMB 14,900/mt, with trading volumes and positions down slightly.

    In spot market, discounts failed to narrow despite of the approaching delivery date, and transactions remained weak, with a sign of price declines and widening discounts. Offers for domestic aluminum were RMB 14,830-14,850/mt in the morning, but transactions were weak, while traded prices of imported aluminum were RMB 14,800/mt, which remains another major reason for weak transactions of domestic aluminum. Ample market supply and sales pressure at the end of the year will restrict any upward movement for aluminum prices.

    Lead:

    In Shanghai lead market, SMM lead prices remained unchanged, and the pessimistic sentiment emerged in pre-market, and smelters felt hard to keep offers firm at RMB 15,500/mt, while sell-offs by traders even reduced traded prices to RMB 15,300/mt. According to NBS, China's lead output was 345.7 kt during October, up 1.1% MoM, generating concerns that whether or not China's lead output will drop in 2009 due to environmental protection inspections.

    Zinc:

    SHFE zinc prices opened low but slipped at noon, and SHFE three-month contract zinc prices dipped to RMB 16,650/mt and closed above RMB 16,700/mt, while SHFE spot-month contract zinc prices showed weak performance at RMB 16,400/mt.

    In spot market, SMM #0 zinc prices were RMB 16,350-16,450/mt before SHFE zinc prices plunged, and market prices were RMB 16,350/mt for #1 zinc and RMB 16,400/mt for #0 zinc, and transactions were weak. No deals of #1 zinc were made after SHFE zinc prices plunged, and discounts for #0 zinc narrowed significantly, leaving no profit margins as well. The price spread between spot-month contract and three-month contract was narrowing, resulting in lackluster trading sentiment.

    Tin:

    In Shanghai tin market, market players stood out of market after tin prices declines yesterday. Prices of low-quality tin will not drop rapidly, and prices for famous brands will remain stable as well. In this context, tin prices will remain in the RMB 116,500-117,000/mt range in Shanghai market with the absence of clear direction from LME tin market.

    Nickel:

    In Shanghai nickel market, traded prices for goods from Jinchuan Group were RMB 128,000/mt, while imported nickel was traded below RMB 127,500/mt, and imported nickel holders still held low interest in cargo movement. A small number of buyers for stock replenishment and traders were willing to reduce the average prices of their inventories, but prices of goods from Jinchuan Group were below its ex-works prices. In this context, Jinchuan Group may lower its nickel ex-works prices again in the near term due to capital pressure.

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