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SMM Daily Review - 2010/2/4 Base Metals Market
Feb 5,2010 10:29CST
SMM Insight

SHANGHAI, Feb. 5 (SMM) --


On Thursday, the May delivery copper contract prices on the SHFE market opened lower at RMB 53,700/mt due to falling LME copper prices on February 3rd, and prices showed signs of stabilizing during the trading, with prices reaching a daily high level of RMB 54,460/mt before the end of morning trade. In the afternoon business, SHFE May-delivery copper prices ended at RMB 54,000/mt following a weak A-shares market.

Spot market inquiries were brisk in the morning. Copper imported from India and Belgium offered discounts at negative RMB 150-100/mt at about 10:00 am, while goods from Jiangxi Copper Company maintained premiums at positive RMB 50/mt. Price offers gradually stabilized following improved transactions, leading to stable spot discounts. Premiums for domestic high-quality copper remained in positive RMB 50-100/mt, and domestic standard-quality copper reported discounts and premiums at negative RMB 50-positive RMB 50/mt. Discounts for imported standard-quality copper were at negative RMB 100, and negative RMB 150/mt for hydro-copper.

Downstream purchasing interest was further stimulated by lower prices along with continuing sentiment of chasing higher seen in Wednesday afternoon, with brisk market transactions reported. Deals in the morning were mainly done in the RMB 53,950-54,380/mt range. SHFE copper prices fell, while downstream buying interest remained, with smooth sales reported. Premiums improved slightly, with levels for domestic high-quality copper at positive RMB 70-100/mt, and traded price were in the RMB 53,800-54,100/mt.

Market transactions will be drawing to an end next week following the start of Chinese New Year holiday. Hence, those downstream producers who intend to build stocks in the pre-holiday market generally plan to complete stock replenishment. Coupled with lower prices this week, downstream buying interest was further stimulated. In addition, optimistic outlook towards post-holiday market prices also spurred downstream producer sentiment to establish stocks, greatly pushing up spot trading volume.


SHFE aluminum prices were weak yesterday. SHFE 1005 aluminum contract prices opened at RMB 16,400/mt, and failed to break through the 60-day moving average line in the morning despite of relatively strong performance, and slipped later following stock and neighboring markets at noon. SHFE 1005 aluminum contract prices closed at RMB 16,520/mt finally, down RMB 90/mt, or down 0.54%. Positions declined by 11,532 lots due to the withdrawal of speculative funds. Technically, SHFE three-month contract aluminum prices moved around 5-day moving average line, showing signs of declining.

In the spot aluminum market, traders continued to raise offers supported by strengthening SHFE aluminum prices in the morning, and limited number of downstream consumers entered the market, but traded prices fell to RMB 16,000/mt after 11:00 following declining SHFE aluminum prices. Overall trading sentiment was lackluster yesterday.  


Domestic lead prices were slower to drop compared with LME lead prices, and market transactions were able to stabilize at RMB 15,500/mt even if in the afternoon. Market reported modest transactions at RMB 15,600-15,700/mt on Wednesday, and domestic lead prices didn’t completely follow price movements on the LME market, which experienced wild fluctuations for the past three trading days. Moreover, lead suppliers continued to maintain offers firm, and downstream stock replenishment before the holiday supported domestic lead market as well, helping domestic lead prices fall at a slower pace.   
Domestic lead prices are expected to move independently along with the arrival of Chinese New Year holiday.


SHFE zinc prices were general yesterday. SHFE zinc prices fluctuated higher after opening low, but weakened later following falling domestic A-shares market, and lost previous gains, with prices finally ending at RMB 17,680/mt. However, zinc prices have consolidated above RMB 17,000/mt for three consecutive days, with struggles between long and short positions intensifying. Some market players believe SHFE zinc prices have fallen by 23% from the highest level of RMB 22,000/mt on January 6th, and have gotten solid support at RMB 17,000/mt, while others believe recent strong US dollar will further weigh on commodities prices. Recent high overall trading volumes on SHFE zinc market indicate the intensifying mixed market views.

In the spot market, the trading sentiment was brisk due to stabilizing SHFE zinc prices and the approach of Chinese New Year holiday. Yesterday, #0 zinc was traded in the RMB 17,250-17,300/mt range in the Shanghai market, with spot discounts at RMB 550/mt against SHFE 1005 zinc contract, and offers for limited high-end brand name products were in the RMB 17,350-17,400/mt range, but with trading volumes limited.


Unfavorable economic data released on Wednesday further pushed requirement for US dollar as a hedge against financial crisis, and temporarily weak US dollar hit 79.5 again, weighing on LME tin prices to fall slightly to USD 16,351/mt. LME tin prices once climbed due to strong buying funds, but prices finally depressed by strong performance of US dollar. Technical indicators showed weak price performance at present, and LME tin prices were largely affected by performance of US dollar and stock markets due to lack of support from fundamentals.

In the Shanghai tin market, tin prices were basically flat compared with the level on Wednesday. Tin from Yunnan Tin group and Yunnan Chengfeng Non-ferrous Metals Co., Ltd was traded in the RMB 135,000-136,000/mt range, and tin from Nanshan Tin Solder Co., Ltd was traded at RMB 133,500/mt. On Thursday, goods from Yunnan Gejiu Zili Metallurgy Co.,Ltd arrived in the market with offers at RMB 136,000/mt. Overall trading sentiment was still sluggish. Recently, stock replenishment from downstream companies was not brisk, and downstream consumption was still sluggish.


On Wednesday night (February 3rd), LME nickel prices opened at USD 18,300/mt and closed at USD 18,300/mt, with highest level at USD 18510/mt and the lowest level at USD 18060/mt, with stable prices compared the previous day. On Thursday, LME nickel prices on electronic trading opened at USD 18,200/mt and gradually climbed to test USD 18,320/mt. Later LME nickel prices surpassed USD 18,320/mt but fluctuated downward to USD 18,100/mt. Finally, LME nickel price quickly rebounded to USD 18,200/mt. Market participants believe that any room for LME nickel prices to fall further will be limited given support from costs.
Offers from the Shanghai nickel market were firm on Thursday. Supply of imported nickel was extremely limited, and goods offered in the market were mainly from Jinchuan Group, with price of imported nickel very close or even flat with prices of imported nickel. End-users entered into the market to make purchase, with traded prices gradually climbing. On Thursday, imported nickel was traded at RMB 144,000/mt, and nickel from Jinchuan Group was traded in the RMB 144,000-144,500/mt range with relatively brisk transactions. Traded prices were RMB 143,000/mt in regions of Guangdong province, and cargo-holders were reluctant to move goods.

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

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