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SMM Daily Review - 2010/1/29 Base Metals Market
Feb 1,2010 10:20CST
smm insight

SHANGHAI, Feb. 1(SMM) --


On Friday, the May-delivery copper contract on the SHFE market opened down for a second day, with prices at RMB 56,780/mt, experiencing narrow fluctuations in the morning session. Spot discounts and premiums were reported in the negative RMB 100/mt to positive RMB 50/mt in the morning trade. Supply of imported copper was sufficient, with prices lower than domestic goods. Spot premiums for Jiangxi Copper reached as high as positive RMB 100/mt along with falling copper prices. Premiums for high-quality domestic copper were positive RMB 0-50/mt, while high-quality imported goods were reported at negative RMB 20/mt to positive RMB 50/mt. Discounts for standard-quality copper were negative RMB 100-0/mt. The range of traded prices expanded following lower prices at the end of morning trade, with levels reported in the RMB 56,250-56,600/mt. Hydro-copper was traded in the RMB 56,150-56,350/mt range. Traded prices fell to RMB 55,390/mt after 2:30 pm, since SHFE copper prices weakened further after afternoon business began. However, spot discounts failed to narrow significantly due to ample supply. Premiums for high-quality copper were still at positive RMB 50/mt, and standard-quality copper reported at negative RMB 100-0/mt, with deals made in the RMB 55,500-56,000/mt, down RMB 700/mt from morning levels.

Since prices dropped greatly to RMB 55,500/mt, buying interest was stimulated. Together with stock replenishment at the weekend, overall trading sentiment on Friday was brisk, and with smooth sales reported. Constant price declines depressed investor confidence, but purchasing interest at lower prices gradually improved. If copper prices remain low, spot trading market will remain brisk, given stock replenishment before the arrival of Chinese New Year holiday.


SHFE aluminum prices continued to drop on January 29th, and SHFE 1005 aluminum contract prices moved steadily supported by profit-taking by limited short positions after opening at RMB 16,170/mt, and rebounded to RMB 16,305/mt at noon, but slipped in the afternoon negatively affected by declines in LME electronic trading and the benchmark Shanghai Composite Index, and fell to RMB 16,020/mt and tested the RMB 16,000/mt mark. SHFE 1005 aluminum contract prices closed at RMB 16,140/mt finally, with an intraday drop of RMB 430/mt, or down 2.6%. Technically, SHFE three-month contract aluminum prices moved below 60-day moving average line, showing signs of falling.

In the spot market, spot aluminum prices fell below RMB 16,000/mt, with most deals made between RMB 15,900-15,920/mt in the morning session. Spot aluminum prices fell slow in the afternoon when SHFE aluminum prices fell below RMB 15,900/mt, with spot discounts against SHFE spot-month aluminum contract narrowing to zero. The falling aluminum prices depressed downstream buying interest, with deals mainly made among traders, and the overall trading sentiment was lukewarm.


All SHFE zinc contracts opened low on January 29th, but later showed signs of stabilizing, since long sentiment seemed strong at the RMB 18,000/mt mark. In this context, spot transactions improved in the morning, and #0 zinc was traded between RMB 17,550-17,600/mt in the Shanghai market, with traded prices for limited high-end branded products moving in the RMB 17,650-17,700/mt range. In the afternoon, SHFE zinc prices dipped rapidly depressed by short positions, and SHFE three-month contract zinc prices fell by 6.1%, with the lowest level of RMB 17,530/mt.

On January 29th, total trading volumes reported 937,000 lots on SHFE zinc market, and positions declined by 13,000 lots due to the withdrawal of long positions. Almost no deals were made in the afternoon in the spot markets. Technically, SHFE three-month contract zinc prices moved below 60-day moving average line, showing signs of declining. Special attention should be paid to the US GDP in 4Q, and if this data is negative, SHFE zinc prices will fall further in the coming week.


Spot trading sentiment in domestic lead markets improved slightly on Friday, as market expectation of further price declines reduced after domestic lead prices weakened for the past one week, with buying interest reported. However, overall trading volume was still limited, since downstream producers this year were not as eager as previous years to build up stocks before the holiday arrives. Well-known branded goods in the Shanghai market were traded around RMB 15,300/mt, and traded prices for unknown branded products were near RMB 15,200/mt. Some lead producers showed no interest in moving a large volume of goods at existing prices due to higher costs or optimistic outlook. Traded prices in the domestic lead market were in the RMB 15,300-15,800/mt.


On Thursday night, LME tin prices once advance, but when the news that Bernanke was reappointed as the Fed's chairman was confirmed on Friday, US dollar experienced strong performance again, weighing on LME base metal prices. Last Thursday (January 28th), LME tin prices closed at USD 17450, down USD 250/mt compared with the previous day. Technical indicators showed LME tin prices moved below 20-day moving average and were on downward track. MACD indicated downward momentum. RSI indicator showed relatively weak performance at 40, and KDJ showed downward price movement. Technically speaking, LME tin prices will continue to experience corrections in the short term.

In the Shanghai tin market, tin prices ceased to fall and began to stabilize on Friday. Some traders told that a portion of downstream companies entered into the market to make purchase, and trading volumes increased, with traded prices of goods from Yunnan Tin group at RMB 135,000-137,500/mt range. With the approaching of the Chinese New Year holiday, downstream companies began to replenish stock as the previous year. In addition, purchasing interest at these companies increased as prices ceased to decline on Friday. Next week, transactions in the Shanghai tin market are expected to be brisk.


On Thursday night (January 28), LME nickel prices closed at USD 18,200/mt, touching the lowest level at USD 17,740/mt and reaching the highest level at USD 18,500/mt. Different from price performance of other base metals, LME nickel prices on electronic trading opened at USD 18,300/mt and moved in the USD 18,200-18,300/mt range in the morning session due to market concern over strikes. However, affected by weak performance of other base metals, nickel prices quickly tested USD 18,080/mt. It is believed in the market that nickel prices are unlikely to have good performance affected by downward price movement of other base metal prices. Although nickel prices may rebound in the future, prices performance in the short term will not be optimistic.
In the Shanghai nickel market, cargo-holders were reluctant to move goods and were basically closed market since low-priced supply was rarely seen in the market. As market lacked direction from mainstream prices, traded prices of imported nickel were at RMB 141,000/mt and traded prices of goods from Jinchuan Group were at RMB 142,000/mt. Although enquiries were active, trading volumes were not high. Traded prices of goods from Jinchuan Group in Guangdong province were at RMB 142,000/mt with few transactions.

To contact the writer on this report: angelawang@smm.cn


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