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SMM Daily Review - 2010/1/21 Base Metals Market
Jan 22,2010 10:12CST
smm insight

SHANGHAI, Jan. 22 (SMM) --

According to data released on Thursday by China’s National Bureau of Statistics, China's GDP rose 8.7% in 2009 to reach 33.53 trillion yuan, down 0.9% from the growth rate in 2008. China's CPI in December was up 1.9% on a yearly basis, growing for a second month. The macro-economic data was generally in line with market expectations, exerting no great impact on the stocks and financial markets. However, it was worth paying attention to the move that the People's Bank of China sold the three-month bills at 1.4088%, up 4.04 basis points from a week earlier, a further sign of credit tightening. 

SHFE copper prices experienced fluctuations after opening down due to weak LME copper market. SHFE three-month copper contract prices dropped as low as RMB 60,300/mt after opening at RMB 60,800/mt. Copper prices later rebounded thanks to buying interest at lower prices, with prices finally closing at RMB 60,970/mt, down RMB 530/mt or 0.86% from a day earlier.

Spot discounts remained on Thursday. Discounts for high-quality copper reported in the negative RMB 150-100/mt, and standard-quality copper reported discounts at negative 250-150/mt, and discounts for hydro-copper were at negative RMB 300-250/mt. Recently, a strong wait-and-see attitude dominated the market. On one hand, downstream producers were still waiting for further price declines. On the other hand, stock replenishment before the Chinese New Year holiday is necessary, but uncertainty towards price outlook depressed spot transactions.

SHFE aluminum market remained sluggish, and SHFE three-month contract aluminum prices opened at RMB 17,300/mt, and fluctuated lower in the morning. Spot aluminum prices slipped as well due to pessimistic market sentiment, and although traders were firm with the lowest prices at RMB 17,000/mt, the pessimistic sentiment dominated downstream consumers, resulting in weak transactions.

SHFE aluminum prices rebounded following other metals price trends and stock markets, and SHFE three-month contract aluminum prices closed at RMB17,465/mt after hitting RMB 17,490/mt, with an intraday drop of RMB 105/mt, or down 0.6%. Technically, SHFE three-month contract aluminum prices moved below 5-day moving average, showing signs of fluctuating at high levels. Aluminum price increases failed to stimulate downstream purchase interest, while traders were reluctant to sell goods and offered higher prices, leading to sluggish spot transactions.

Trading sentiment in the domestic lead market remained lackluster. A small number of deals were made near the low end of RMB 16,450-16,500/mt. Domestic lead price corrections were smaller than market expected, and a wait-and-see attitude still dominated the market as a result. Whether or not buying interest at lower prices will be stimulated before the arrival of Chinese New Year holiday depends on the financial markets and market confidence.

SHFE zinc prices opened low and went higher. SHFE 1005 zinc contract opened at RMB 20,770/mt, but later dipped to RMB 20,530/mt, and received support at 30-day moving average. However, spot buying was not as brisk as expected, since the weak performance of SHFE zinc and SHFE copper prices depressed buying interest.

On January 21st, #0 zinc was traded around RMB 20,000/mt, with discounts of RMB 450-500/mt against SHFE 1004 zinc contract, and #1 zinc was traded around RMB 19,950/mt in Shanghai market. #0 zinc prices advanced to RMB 20,100/mt in the afternoon following rising SHFE zinc prices, with discounts expanding to RMB 600-650/mt, signaling the weak spot market. Smelters held low interest in moving goods due to lower zinc prices, but market supply was sufficient, with goods mainly from traders. Spot zinc prices will struggle at RMB 20,000/mt in the short term, with low-end prices expected to dip to RMB 19,800/mt.

On Wednesday night (January 20th), US dollar rebounded along with the news that China would tighten its credit, which exerted pressure on metal prices. LME tin prices fell below 10-day moving average, touching the lowest level at USD 17,700/mt and closing at USD 17,775/mt, down USD 260/mt from the previous day. On Thursday, LME tin prices stood up 5-day moving average again and continued to test USD 18,000/mt.

In the Shanghai tin market, offers from major smelters declined as mainstream prices were constantly moving down this week. Expect that Yinnan Tin group still kept offers at RMB 150,000/mt, Danzhou Jinhai Tin Industry Co., Ltd and Yunnan Chengfeng Non-Ferrous Metals Co., Ltd offered prices at RMB 145,000/mt in the morning but with extremely few transactions. On Thursday, unknown brand goods still dominated market transactions, and prices were in the RMB 137,000-139,000/mt range; goods from Yunnan Tin group only reached limited transactions with traded prices in the RMB 141,500-142,000/mt range. It was heard that few traders were willing to move goods from Yunnan Tin group at RMB 139,000/t

On Wednesday night (January 20th), LME nickel prices received support at the lowest level of USD 18,760/mt and closed at USD 18,990/mt. Prices fell by USD 345/mt after profit-taking affected by impact that China would tighten its credit supply. On Thursday, LME nickel prices fluctuated widely. Prices fell below USD 18,910/mt in the morning, while climbed significantly in the afternoon with prices testing USD 19,100/mt and gradually moving down later. Market views were quite mixed, and prices will mainly experience corrections in the near future.

In the Shanghai nickel market, panic selling was sparked at some cargo-holders and prices declined all the way, although costs were on an upward track for traders. Offers were mixed in a wide range in the morning, and supply was ample in the market. Traded prices were in the RMB 141,000-143,000/mt range for imported nickel, while traded prices were in the RMB 143,000-144,000/mt range for goods from Jinchuan Group. Although mixed sentiment increased in the market, downstream inquires and trading were both brisk. Trading volumes reached a peak recently in the Shanghai nickel market.


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