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SMM Daily Review - 2010/2/2 Base Metals Market
Feb 3,2010 10:35CST
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Source:SMM

SHANGHAI, Feb. 3 (SMM) --

Copper

On Tuesday, the May-delivery copper contract prices on the SHFE market opened highly at RMB 55,210/mt, but weakened later following withdrawal of long positions, moving in the RMB 54,800-54,900/mt range. In the afternoon session, SHFE May delivery copper contract prices fell further, dropping as low as RMB 54,110/mt before the end of trading, with prices finally ending at RMB 54,300/mt.

In the spot market, discounts for imported standard-quality copper from India and Belgium were at negative RMB 150/mt at 10:00 am, while domestic copper goods maintained offers firm, with premiums for domestic high-quality copper at positive RMB 30-50/mt. After 10:30 am, market offers gradually stabilized. Discounts for imported standard-quality copper were at negative RMB 100/mt, and discounts for imported high-quality copper, such as AE and CCC-P were RMB 0/mt. Discounts for domestic standard-quality copper were at negative RMB 50/mt, and domestic high-quality copper reported premiums at positive RMB 30-50/mt. Traded prices of refined copper were generally in the RMB 54,700-55,000/mt range. Discounts for hydro-copper were at negative RMB 150/mt, with deals done in the 54,600-54,750/mt range.

Downstream producers were lack of confidence towards copper price trends, and pessimistic outlook dominated market sentiment, resulting in low buying interest. Price rebounds failed to stimulate buying interest, with depressed sales. SHFE copper prices weakened in the afternoon trade, but market transactions were depressed, which weighed on rising room of spot premiums. Premiums for Jiangxi Copper reached as high as RMB 100/mt, and discounts for low-end standard-quality copper were still at negative RMB 100/mt, with limited transactions reported when SHFE current-month copper contract prices were below RMB 54,500/mt. Mainstream traded prices were largely in the RMB 54,300 -54,600/mt range.

Stock replenishment in the pre-holiday market is nearly complete, and pessimistic outlook resulted in a wait-and-see attitude. SMM believes spot market will remain lackluster before the arrival of Chinese New Year holiday.

Aluminum

SHFE 1005 aluminum contract prices opened at RMB 16,410/mt positively affected by rising LME aluminum prices, and later soared to the 5-day moving average line of RMB 16,490/mt. However, the weak market fundamentals prior to the Chinese New Year holiday and the lack of upward momentum in stock markets both limited the upward momentum in SHFE aluminum prices. In this context, SHFE aluminum prices fluctuated lower persistently, with the lowest level at RMB 16,245/mt, and closed at RMB 16,360/mt finally, with an intraday growth of RMB 185/mt, or up 1.14%. Technically, SHFE 1005 aluminum contract prices moved below the 5-day moving average line, showing signs of declining further.

Yesterday, aluminum prices rebounded slightly, generating purchase interest in the market. As a result, a limited number of downstream consumers held high interest in purchases, but traders were reluctant to move goods, leading to tight market supply. However, the bullish market sentiment failed to push up spot aluminum prices due mainly to the weak performance of SHFE aluminum prices and intensifying struggles between long and short positions in the market, with the wait-and-see sentiment still dominating market players. Downstream fabricators shut down for holiday gradually, and the waning consumption will give no support to aluminum prices, so SMM predicts aluminum prices will continue to fluctuate before the Chinese New Year holiday.

Lead

Buying interest at lower prices in the domestic lead market surprised market. Market deals were made around RMB 15,200/mt in the morning, and inquiries were brisk in the afternoon, and producers' strong attitude in keeping offers firm triggered strong purchasing interest, neglecting depressed performance of SHFE base metals. Domestic lead market responded positively after LME lead prices stabilized at USD 2.000/mt. Compared with previous fluctuation level of RMB 16,000/mt, existing market prices were able to stimulate buying interest. On the other hand, declines for ninth consecutive day still overshadowed the market. Once middlemen or downstream producer confidence improves, positive impact on the domestic lead market will be evident. However, it is not a wise move to bottom-fish, given volatile fluctuations in recent financial markets.

Zinc

SHFE zinc prices opened high, and spot market showed better performance yesterday. #0 zinc was traded between RMB 17,000-17,050/mt, with spot discounts at RMB 520/mt against SHFE 1005 zinc contract, but, traded prices for limited brand name products were around RMB 16,970/mt following falling SHFE zinc prices.

However, SHFE zinc prices lost previous gains negatively affected by falling domestic A-shares market, with SHFE three-month contract zinc prices hitting the lowest level at RMB 17,160/mt. SHFE three-month contract zinc prices advanced slightly before closing supported by purchases by long positions, with prices finally ending at RMB 17,305/mt. SHFE zinc prices showed sluggish performance yesterday, and was easily affected by surrounding environment, so zinc prices remained on a downward track, and will likely fall below RMB 17,000/mt. Technically, SHFE three-month contract zinc prices still fluctuated below the 5-day moving average line, with signs of falling further.

Tin

On Monday night (February 1st ), LME tin prices continued to fall, and LME tin prices on electronic trading was closed at USD 16,200/mt, with lowest level at USD 16,000/mt. On Tuesday, LME tin prices struggled around 60-day moving average. Technically speaking, LME tin prices were slightly weak. US dollar met strong resistance after hitting 79.5, affected by announcement of positive economic data, and it is expected that US dollar is expected to experience correction in the near term. In this context, base metal prices which were depressed recently will receive support from US dollar. Particular attention should still be paid to whether tin prices will receive support at 60-day moving average or not.

In this Shanghai tin market, tin prices only declined slightly although LME tin prices dropped sharply. Supply of tin ingots was extremely limited, supporting tin prices in the Shanghai tin market. On Tuesday, tin from Yunnan Tin group dominated market transactions with mainstream prices in the RMB 135,500-136,000/mt range, but trading sentiment was sluggish.

Nickel

On Monday night (February 1st), LME nickel prices opened at USD 18,550/mt and closed at USD 18,100/mt, with highest level reaching at USD 18,577/mt and lowest touching at USD 17,851/mt. In addition, market is dominated by pessimistic sentiment, and LME nickel prices fell by USD 500/mt as workers whose contract expired at Xstrata have already reached temporary agreement. On Tuesday, LME nickel prices on electronic trading opened at USD 18,075/mt, and fell between USD 18,000-18,180/mt affected by downward price movement of other base metals in the morning session. Later, LME nickel prices fell below USD 18,000/mt and tested USD 17,900/mt. Market participants believed that nickel prices in spot market will receive support from tight supply in the spot market and strong nickel prices from Jinchuan Group.

In the Shanghai nickel market, transactions were relatively brisk compared with previous days. Cargo-holders offered firm prices in the morning session, and traded prices gradually climbed due to reduced supply of low-priced goods as well as price rebound in the morning session in overseas market. On Tuesday, imported nickel was traded between RMB 141,000-141,500/mt range, and nickel from Jinchuan Group was traded between RMB 142,000-142,500/mt range due to increased trading volumes. Nickel was traded at RMB 142,000/mt in regions of Guangdong, but transactions were few due to few supply of goods in the market.

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

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