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SMM Daily Review - 2010/1/22 Base Metals Market
Jan 25,2010 11:32CST
smm insight

SHANGHAI, Jan. 25 (SMM) --

On Friday, copper prices on the SHFE market opened lower. SHFE three-month copper contract process opened at RMB 59,580/mt, down 2.33%. Price movements were stable in the morning session, with prices moving in the RMB 59,500-59,600/mt, and prices sank to RMB 58,600/mt after opening in the afternoon business. Positions increased by 14,974 lots, and prices finally closed at RMB 59,380/mt thanks to rebounds from low levels, moving between the 20 and 30-day moving average.

In the spot market, discounts for domestic high-quality copper were negative RMB 100/mt, and later moved in the negative RMB 70-120/mt due to fluctuating SHFE copper prices. Price of domestic copper was firmer than that of imported goods. Discounts for standard-quality copper were reported in the negative RMB 150-200/mt, with unwillingness to expand further. Mainstream traded prices in the morning were in the RMB 59,350-59,600/mt range, and prices of hydro-copper were RMB 59,200-59,350/mt. In the afternoon business, discount for high-quality copper was at RMB 0/mt, and for standard-quality copper was in the negative 50-100/mt. Trading sentiment in the morning was modest along with buying interest at lower prices and stock replenishment at the weekend. However, market confidence was depressed by falling SHFE copper price, resulting in lackluster trading sentiment. Mixed market views expanded as a result.

SMM believes SHFE copper prices will likely test RMB 58,000/mt in the short term, and bullish sentiment still remains in the market, but the sentiment will change if copper prices weaken further.

SHFE three-month contract aluminum prices opened as low as RMB 17,275/mt as expected, and fluctuated at low levels in the morning, but later plunged following other metals prices, dipping to RMB 16,930/mt. However, SHFE aluminum prices received strong support at RMB 17,000/mt, and then rebounded slightly supported by profit-takings by limited short positions, with prices ending at RMB 17,060/mt, with an intraday drop of RMB 340/mt, or down 1.95%. Positions declined by 13,142 lots, showing signs of the withdrawal of speculative funds. Technically, SHFE three-month contract aluminum prices moved below the 5-day moving average line, with signs of declining. Spot aluminum prices were below RMB 17,000/mt, and a limited number of downstream consumers entered the market due to their optimistic price outlook and high sentiment in stock replenishment prior to the Chinese New Year holiday, with transactions improved compared with the previous two days.

SHFE zinc prices opened low and moved lower. Zinc prices experienced significant declines on January 22nd, and SHFE spot-month contract zinc prices dipped to RMB 19,210/mt, while SHFE three-month contract zinc prices fell to RMB 19,700/mt, nearly falling to daily limits. Later, zinc prices rebounded following stabilizing stock markets, with SHFE three-month contract zinc prices closing at RMB 19,930/mt, down 3.88%.

In the spot zinc market, spot zinc prices fell as well along with falling SHFE zinc prices. Mainstream traded prices for #0 zinc were RMB 19,500-19,550/mt in the morning, but offers have fallen below RMB 19,500/mt in the afternoon, with the lowest prices for #0 zinc heard at RMB 19,280/mt, but trading volumes were limited. Although zinc prices around RMB 19,500/mt were very attractive to downstream consumers, the overall spot trading sentiment was cautious and rational in view of the weak performance of zinc prices and domestic A-share stock market.

On Friday, domestic lead prices dropped further. Downstream producers continued to stand on the sidelines due to weak end-use consumption and pessimistic sentiment, waiting for further price declines. On the other hand, lead producers showed no interest to reduce prices, and market was still in a stalemate. Overall trading sentiment was extremely low. Well-known branded products were traded near RMB 16,500/mt, while traded prices of unknown products were around RMB 16,350/mt, with smaller price gap between the two.

On Thursday night, LME nickel prices received support at USD 18,650/mt and closed at USD 18,950/mt. A series monetary policies adopted by Chinese government affected investors' confidence, and LME nickel prices continued to fall. Last Friday, LME nickel prices fluctuated widely, with prices falling below USD 18,550/mt in the morning session and rebounding later, but with weak upward momentum. It is widely believed in the market that LME nickel prices will mainly move on a downward track.

In the Shanghai nickel market, traded prices declined all the way, and traders limited trading volumes in response, with market supply tightening as a result. Traded prices of imported nickel were in the RMB 141,500-143,000/mt range, and traded prices of goods from Jinchuan Group were in the RMB 142,500-143,000/mt range. In addition, futures prices for current-month nickel in Wuxi electronic trading were flat at spot nickel prices. However, prices for nickel from Jinchuan Group were RMB 3,000/mt higher than imported nickel, which is the transaction rule in Wuxi electronic trading. Few market players made transactions on electronic trading, and trading sentient was sluggish last Friday.

As investors were still concern about China's tightness of monetary policy, European and US stock markets both fell sharply and LME copper prices continued to fall last Thursday. On Thursday night, LME tin prices were under pressure and closed at USD 17,750/mt, down USD 25/mt from a day earlier. Last Friday, LME tin prices continued to experience corrections and moved below 10-day moving average. It is expected that LME tin prices will continue to fluctuate in the short term.

In the Shanghai tin market, Yunnan Tin Group lowered offers to RMB 145,000/mt on January 22nd. Currently, well-known branded products holders were reluctant to move goods with prices lower than RMB 140,000/mt, and they were extremely unwilling to sell goods at present as they were waiting for price increases in the future. Downstream consumers adopted a wait-and-see attitude and they showed little interest in goods with offers above RMB 140,000/mt. Last Friday, overall trading sentiment was sluggish, and unknown brands tin dominated transactions, with traded prices in the RMB 136,000-137,000/mt range. Goods from Yunnan Tin Group were traded in the RMB 140,000-141,000/mt range, with very limited trading volumes reported.


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