SMM Daily Review - 2010/2/3 Base Metals Market

SHANGHAI, Feb. 4 (SMM) --

Copper

On Wednesday, the May delivery copper contract prices on the SHFE market opened at RMB 55,070/mt, but were dragged down by sluggish China's A-shares market performance. After 10:30 am, SHFE May-delivery copper contract prices stopped falling and moved higher, with prices closing at RMB 55,890/mt, up RMB 1,100/mt or 2.01% from a day earlier.

Discounts remained in the Spot market during the morning trade. Of those, discounts for high-quality copper were at negative RMB 50-0/mt, with deals mainly made in the RMB 54,700-55,100/mt range. Discounts for standard-quality copper were at negative RMB 150-100/mt, with deals mainly reported at RMB 54,500-54,850/mt. Discounts for hydro-copper were at negative RMB 200-150/mt. Downstream producers generally adopted a wait-and-see attitude in the morning in view of fluctuating copper prices on the SHFE market, resulting in moderate transactions. However, rising SHFE copper prices in the afternoon business stimulated buying interest, with spot transactions improved following stock replenishment for the upcoming holiday. Suppliers of high-quality copper became reluctant to move goods in the afternoon, with limited availability of goods. Discounts for standard-quality copper narrowed to RMB 0/mt.

Domestic demand will wane gradually following approach of Chinese New Year holiday, and financial news will continue to dominate copper price trends for the foreseeable future. Market is waiting for the US's non-agricultural employment data to be released this Friday. Before announcement of the data, SMM believes LME copper prices will fluctuate in the USD 6,800-7,100/mt range after previous volatile performance.

Aluminum

Yesterday, SHFE aluminum prices rebounded strongly, and SHFE three-month contract aluminum prices opened at RMB 16,525/mt, but later slipped to RMB 16,420/mt. SHFE three-month contract aluminum prices advanced steadily at noon supported by 5-day moving average line and rebounding stock markets, with prices ending at RMB 16,745/mt finally, returning above 60-day moving average line. Positions increased slightly, and trading volumes grew significantly. Technically, SHFE three-month contract aluminum prices moved around 5-day moving average line, showing signs of rising.

Aluminum prices fluctuated widely in the spot market in the morning, and the wait-and-see sentiment prevailed among market players. Traders raised offers gradually after aluminum prices moved on an upward track at noon, with offers climbing above RMB 16,100/mt, and market supply became tight due to the reluctance by cargo-holders to move goods. Aluminum prices will likely rebound in the short term, but will remain uncertain in the long run, since macro economic news will have great effect on aluminum prices.

Lead

Domestic lead prices tracked strong performance of LME lead prices, with high acceptance reported at RMB 15,500/mt from downstream producers and some investors. However, lead producers controlled selling volume, tightening market supply. Since Chinese New Year holiday will arrive soon, this week will be an appropriate period for market players who plan to do business before the approach of the holiday. Solid news is necessary for domestic lead prices to rapidly rebound above RMB 16,300/mt, given existing brisk trading sentiment among traders and overall weak downstream demand.

Zinc

Yesterday, SHFE zinc prices opened flat, and SHFE three-month contract zinc prices dipped to RMB 17,395/mt, heavily weighing on zinc spot markets. #0 zinc was traded between RMB 17,050-17,100/mt, while #1 zinc was traded around RMB 17,000/mt in the Shanghai market. However, SHFE zinc prices rebounded strong after 11:00 following rising domestic A-shares market, with prices ending at RMB 18,160/mt, up 3.8%. In this context, spot zinc prices advanced as well, but spot discounts expanded significantly due to rising zinc prices, with discounts widening to RMB 600/mt or above from RMB 500/mt against SHFE 1005 zinc contract.

The highest traded prices for #0 zinc were about RMB 17,500/mt in the afternoon, much higher than SMM zinc prices. In this context, spot market sentiment improved markedly, and downstream inquiries were active as well. Although zinc prices have underwent corrections for several days, opening the possibility of zinc price increases, zinc prices will likely continue to fluctuate in the short term before macro policies and economic trends become clear. SMM predicts SHFE zinc prices will continue to fluctuate at low levels for the foreseeable future.

Tin

Boosted by positive economic data, stock markets in Europe and America both closed with gains on Tuesday. US dollar continued to fall, and LME tin prices (February 2nd) closed with gains at USD 16,530/mt as a result. On Wednesday, US dollar continued to fall, supporting LME tin prices moving between 30-day moving average and 60-day moving average and above Bollinger Band. Technical indicators continued to show weak momentum.

In the Shanghai tin market, tin prices continued to fall slightly, but any room for tin prices to fall further will be limited given the tight supply of goods in the market. Tin from Yunnan Tin group was traded in the RMB 135,000-136,000/mt range, and goods from Nanshan Tin Solder Co,Ltd were traded in the RMB 133,500-134,000/mt range with limited transactions.

Nickel

On Wednesday night, LME nickel prices opened at USD 18,075/mt and closed at USD 18,400/mt, with highest level at USD 18,425/mt and lowest level at 17,886/mt. The concern over European credit crisis was eased, and economic data released from the US were positive temporarily, pushing rebound of LME nickel prices as a result. On Wednesday LME nickel prices opened at USD 18,200/mt, and gradually surpassed USD 18,400 and USD 18,500/mt. However, LME nickel prices continued to fluctuate within this rang since prices met great pressure at USD 18,500/mt previously. Market participants believe any room for LME nickel prices to fall further will be limited.

Supply of low-priced goods was limited in the Shanghai nickel market, and offers from cargo-holders were mixed in the morning session. As supply of nickel was extremely limited in the market, goods offered in the market were mainly from Jinchuan Group, and prices of nickel from Jinchuan Group were very close with prices of imported nickel. As end-users almost completed stock replenishment pre-Chinese New Year and LME nickel prices rebounded, traded prices climbed as a result. On Wednesday, imported nickel was traded in the RMB 142,000-142,500/mt range, and nickel from Jinchuan Group was traded in the RMB 143,000-143,500/mt range. Transactions were few for high-priced nickel from Jinchuan Group. Traded prices in regions of Guangdong province were at RMB 142,000/mt, and traders were reluctant to move goods given the difficulty in replenishing stocks.

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

 
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