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SMM Daily Review - 2010/2/1 Base Metals Market
Feb 2,2010 10:20CST
smm insight

SHANGHAI, Feb. 2 (SMM) --


SHFE three-month contract copper prices opened at RMB 55,050/mt, reaching as low as RMB 53,360/mt, with prices closing at RMB 54,470/mt, down RMB 1,700/mt or 3.03%. Panic sell-offs in the morning session caused the copper contract prices to drop to its daily allowable limit, and prices rebounded in the afternoon business, reducing price declines.
In the spot market, discounts and premiums were at negative RMB 50-positive RMB 100/mt. Of those, hydro-copper reported discounts at negative RMB 100-50/mt, and discounts for standard-quality copper were at negative RMB 50-0/mt, and high-quality copper set premiums at positive RMB 100/mt. Large price declines added to the wait-and-see attitude among downstream purchasers, leaving sluggish market transactions. In the afternoon, buying interest was stimulated at lower prices, supporting copper prices, with transactions improved from morning levels.
In the short term, copper prices will continue to experience downward corrections. Whether or not copper prices will stop falling further depends on macro news and market sentiment, and LME copper price is expected to find support at USD 6,500/mt.


SHFE aluminum prices ended its downward track after constant declines, and although SHFE copper and zinc prices closed down more than 3%, SHFE aluminum prices closed up with the exception of SHFE 1002 aluminum contract, which declined by RMB 100/mt. SHFE 1005 aluminum contract prices fell below the support level of RMB 16,000/mt in the morning session following other base metals after opening at RMB 16,210/mt, with the lowest level at RMB 15,935/mt, but later moved higher in the afternoon supported by purchases of some speculators, with prices finally ending at RMB 16,435/mt, up RMB 160/mt, or up 0.99%. Technically, SHFE 1005 aluminum contract prices moved below 5-day moving average line.

Spot aluminum markets showed signs of intensifying struggles between long and short positions currently, and spot discounts increased to RMB 100/mt. However, a limited number of downstream consumers began purchasing for stocks after SHFE aluminum prices stabilized at noon, but relatively ample supply helped limit the upward momentum for traded prices. Spot aluminum prices climbed in the afternoon following rising SHFE aluminum prices, and traded prices moved in the RMB 15,730-15,760/mt range, with spot discounts narrowing to RMB 50/mt.  Almost no positive factors could support aluminum prices based on current market fundamentals, so market sentiment became the major reason behind the strong momentum of SHFE aluminum prices yesterday. Copper and zinc prices remained on a downward track, and aluminum prices will not likely move higher in view of weak market fundamentals, and SMM predicts aluminum prices will continue to fluctuate in the near term. 


The depressed trading sentiment in the afternoon improved slightly from morning levels, but downstream producers mainly made inquiries rather than transactions, with strong wait-and-see attitude remaining. In the morning trade, lead circulating in the market failed to find support at RMB 15,000/mt, with more than 80% market players taking a pessimistic view towards outlook. Lead producers maintained prices around RMB 15,300/mt, and some downstream producers stayed out of market. Any improvement in the domestic lead market will depend on performance of LME lead market and global financial market sentiment.


All SHFE zinc contracts opened low and continued to be weak. However, SHFE zinc prices did not lead domestic base metals prices declines any more, and SHFE 1005 zinc contract prices hit the lowest level of RMB 17,120/mt, and closed at RMB 17,430/mt, but the weak performance of SHFE copper prices heavily depressed downstream buying interest, with the wait-and-see sentiment prevailing among market players. #0 zinc was traded between RMB 16,750-16,850/mt, with discounts at RMB 500/mt against SHFE 1005 zinc contract, and offers for limited branded products were even as low as RMB 16,700/mt when SHFE zinc prices fell. However, overall trading volumes were limited yesterday.

Total trading volumes set a new high at 1.12 million lots, and positions increased by 11,500 lots, mainly long positions, indicating market mixed views intensified when SHFE zinc prices fell from RMB 22,000/mt to RMB 17,000/mt. SHFE zinc prices are expected to end the downward track until LME zinc prices find solid support at USD 2,000/mt, and SHFE 1005 zinc contract prices will likely fall to RMB 16,000/mt for the foreseeable future.


Last Friday (January 29th), LME tin prices dropped sharply under great downward price pressure of other base metals, and LME tin prices on electronic trading touched the lowest level at USD 16,750/mt and closed at USD 16,999/mt, down USD 451/mt compared with the previous day. On Monday, LME tin prices continued to fall with the lowest prices touching below 60-day moving average. Technically, J indicator slightly climbed, but didn’t get support from other indicators. Low-end price trend was not clear, and close attention should be paid to that whether prices can receive support at 60-day moving average or not.

Although LME tin prices stumbled on Monday, tin prices in the Shanghai market basically fluctuated in the narrow range. Goods from Yunnan Tin group were traded at RMB 136,000-137,500/mt range with few transactions. Trading sentiment came back to be quite compared with slightly brisk transactions last Friday. Traders were reluctant to move goods given tight supply of goods in the market. Downstream consumers were waiting for lower prices in the Shanghai tin market and only enquired prices in the market since LME tin prices stumbled. Goods from Yunnan Tin group dominated the market transactions, and very few transactions of unknown brand goods were heard in the market with prices at RMB 134,500/mt.


Last Friday (January 29th), LME nickel prices opened at USD 18,300/mt and closed at USD 18,600/mt, with highest level at USD 18,910/mt and lowest level at USD 18,050/mt. On Monday, LME nickel prices rebounded by USD 400/mt due to market concern over labor strike that may affect supply of nickel. On Monday, LME nickel prices opened at USD 18,550/mt, but fell to test USD 18,100/mt affected by downward price movement of other base metals. Later LME nickel prices rebound. It is widely believed in the market that nickel prices will rebound in the short term, but close attention should be paid to force of rebound momentum as LME nickel prices weighed heavily by bad performance of other base metal prices

Since supply of goods was tight in the Shanghai nickel market, some traders were reluctant to move goods. Offers were relative low in the morning session, but prices gradually rebounded along with increased transactions and rebound of LME nickel prices. On Monday, imported nickel was traded in the RMB 141,000-142,000/mt range, and goods from Jinchuan Group were traded in the RMB 142,000-142,500/mt range. As trading volumes reduced, enquires were also moderate. Compared with price levels n the Shanghai nickel market, goods from Jinchuan Group were traded in the RMB 142,500-143,000/mt range in Beijing and at RMB 142,000/mt in regions of Grougdong.

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


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