SMM Daily Review - 2010/1/25 Base Metals Market

SHANGHAI, Jan. 26 (SMM) --
Copper
On Monday, the May delivery copper contract on the SHFE market opened slightly higher at RMB 59,780/mt, and prices fluctuated in the RMB 59,400-59,600/mt in the morning session amid a wait-and-see sentiment market.  Premiums were seen for high-quality copper in the spot market, and standard-quality copper set discounts at negative RMB 100/mt. However, few transactions were done due to low buying interest from mixed views towards outlook. After 10:30 am, high-quality copper reported discounts in the negative RMB 0-50/mt, and with traded prices in the RMB 59,450-59,650/mt.  Discounts for standard-quality copper were in the negative RMB 80-150/mt, mainly done in the RMB 59,350-59,500/mt. Discounts for hydro-copper were at negative RMB 250-300/mt, with deals made in the RMB 59,250-59,400/mt. Imported copper dominated market supply, and offers of domestic standard-quality copper were firm.

In the afternoon business, copper for the May delivery on the SHFE market hit a daily new high of RMB 60,060/mt at 14: 23 pm following buying activities, after the negative impact from credit tightening was absorbed by the market, and closed at RMB 59,930/mt after a slight decline. Currently, SHFE May-delivery copper contract prices continued to move in the 20 and 30-day moving average, and with a daily decline of 16 lots in positions. Although SHFE copper prices rebounded, buying interest in the spot market failed to be stimulated, and discounts in the afternoon were flat with morning levels. Traded prices were in the RMB 59,600-59,800/mt range. If copper prices fail to advance in a consecutive way, downstream purchasing interest will unlikely improve following expanded mixed views towards outlook. 

Aluminum
SHFE aluminum prices fluctuated at low levels in the morning, and moved higher in the afternoon. SHFE three-month contract aluminum prices closed at RMB 17,350/mt, up 0.3%, with the lowest level and highest level at RMB 17,110/mt and RMB 17,450/mt, respectively, and positions increased by 5,720 lots. SHFE aluminum prices fell further after breaking through the 20-day moving average line, and then moved around 30-day moving average line. Technically, SHFE aluminum prices will fluctuate this week after a series of negative news released last week have been absorbed.

In the spot aluminum market, aluminum prices declined further after falling below RMB 17,000/mt, and then moved around RMB 17,000/mt in the morning, with lukewarm trading sentiment. A limited number of cargo-holders who were eager to generate cash offered prices as low as RMB 16,730/mt, but almost no deals were reported. Offers quoted by traders increased to RMB 16,780/mt following rising SHFE aluminum prices in the afternoon, but buyer interest remained low, waiting for a clear market direction. 

Zinc
SHFE zinc prices opened low and moved higher, and SHFE three-month contract zinc prices climbed to RMB 20,160/mt, since positions of SHFE 1005 zinc contract increased by 11,627 lots. However, the Dow Jones Industrial Average closed at 10,173 last Friday, down 216.9, or down 2.1%, a drop for three consecutive trading days, and the largest intraday drop since October 30th, 2009. In the context, spot zinc market sentiment failed to recover despite of rising zinc prices, with trading sentiment moderate. #1 zinc was traded around RMB 19,250/mt, and #0 zinc was traded between RMB 19,300-19,350/mt in the morning, while #0 zinc was traded between RMB 19,400-19,450/mt in the afternoon. However, it is worth noting that the Chinese New Year holiday will begin three weeks later, so the traditional peak period for stock replenishment will likely be advanced to this week since downstream manufacturers will shut down for holiday in advance. In this context, recent low spot zinc prices will show the opportunity to downstream consumers to purchase goods.

Lead
Domestic lead market reported mixed views towards outlook. Some downstream producers believed that current lead prices have reached to the lowest level, and was preparing for stock replenishment. However, most downstream producers remained pessimistic towards outlook, waiting for further price declines. As a result, overall trading sentiment was weak. Well-known branded products were traded around RMB 16,300/mt, and traded prices of unknown branded products were at RMB 16,100/mt.

SMM believes that sellers and buyers in the domestic lead market will struggle at RMB 16,000/mt. 

Nickel
Last Friday, LME nickel prices received support at USD 18,075/mt and closed at USD 18,450/mt, with prices down USD 500/mt. On Monday, LME nickel prices fluctuated widely but advanced slightly. LME nickel prices constantly declined to USD 18,250/mt but rebounded to USD 18,450/mt in the morning session. It is widely believed in the market that any downward room for LME nickel prices will be limited, and prices will get strong support at USD 18,000/mt.

In the Shanghai nickel market, market players were waiting for nickel price cuts by Jinchuan Group due to significant declines in LME nickel prices as well as relatively ample supply of goods in the market, but Jinchuan Group gave no response. Offers in the Shanghai nickel market declined significantly, but overall trading sentiment was quiet. Traded prices of imported nickel were in the RMB 140,000-140,500/mt range, and traded prices of goods from Jinchuan Group were in the RMB 141,000-141,500/mt range. Some market players paid attention to price spread between Wuxi electronic trading and the spot market. On Monday, overall trading sentiment was quiet, and transactions of goods from Jinchuan Group were relatively good.

Tin
Last Friday, after dropping below 5-day and 10-day moving average lines, LME tin prices fell as low as USD 17,650/mt. Later, LME tin prices were under great pressure at USD 18,000/mt and fell between the 10-day and 20-day moving average lines. Technically, KDJ showed downward price trends and suggested relatively weak price performance. On Monday, LME tin prices experienced quiet performance. It is expected that LME tin prices will depend on price performance of other base metals. LME tin prices were at USD 17,700/mt at 5:30 pm, almost near 5-day moving average but failing to move higher than this level.

In the Shanghai tin market, Yunnan Tin Group kept offers firm at RMB 145,000/mt, but actual traded prices were quite different. Traders couldn't accept quick price declines and were reluctant to move goods in anticipation of price rebound in the future. On Monday, goods from Yunnan Tin Group were traded in the RMB 139,000-140,000/mt range, with few transactions reported, and few traders wanted to move goods for cash and sold goods at RMB 137,000/mt. Unknown brand tin was traded in the RMB 135,000-136,000/mt range. Currently, wait-and-see attitude was expanding in the Shanghai tin market. Traders were reluctant to move goods, and downstream consumers reduced purchasing volumes as well, leaving overall trading sentiment sluggish.

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