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SMM Daily Review - 2010/2/5 Base Metals Market
Feb 8,2010 10:21CST
smm insight

SHANGHAI, Feb. 8 (SMM) --

On February 4th, LME copper prices closed at USD 6,390/mt, down USD 294/mt, with stocks down by 1,050 mt to 539,425 mt. Affected by LME copper market, SHFE three-month copper contract prices opened lower at RMB 52,280/mt, and experienced narrow fluctuations during the trading, with prices finally ending at RMB 51,980/mt, down RMB 1,960/mt or 3.63%.

Spot premiums and discounts improved slightly following sharp declines on the SHFE copper market. Of those, spot premiums for high-quality copper were at positive RMB 100-150/mt, and standard-quality copper reported premiums at RMB 0-positive 50/mt, and discounts for hydro-copper were at negative RMB 100-50/mt. Market buying sentiment was depressed by plunging copper prices on Wednesday after stabilizing in earlier week, and only those who had not built enough stocks for production during the period entered the market when prices were low. Mainstream traded prices were in the RMB 51,900-52,200/mt. LME copper prices weakened further after SHFE copper prices closed lower. SHFE copper inventories soared 13,092 mt over the week, a sign of waning spot domestic consumption following the arrival of Chinese New Year holiday. LME copper prices dropped below USD 6,300/mt, and the US non-farm employment data will be released soon.

Copper prices are expected to fall further for support in the short term for various kinds of negative news in recent days.

On February 5th, SHFE aluminum prices tracked the weak trends of LME aluminum prices, and SHFE 1005 aluminum contract prices opened at RMB 16,150/mt, with the strong support at RMB 16,100/mt. Later, SHFE aluminum prices fluctuated higher, but again dipped to RMB 16,130/mt in the afternoon negatively affected by weak spot market and plunged stock markets. SHFE aluminum prices advanced slightly before closing due to the withdrawal of short positions, with prices ending at RMB 16,280/mt, and with an intraday drop of RMB 205/mt or 1.24%, while SHFE copper prices declined by 3.5% and SHFE zinc prices fell by nearly 3%. Technically, SHFE 1005 aluminum contract prices moved below 5-day moving average line, showing signs of falling further. Spot aluminum market was sluggish given aluminum price slumps, and traders have sold out their previous inventories, so trading sentiment was neutral.  

On Friday, the spot domestic lead market reported lackluster trading sentiment. LME lead prices experienced weak performance, with volatile performance, resulting in stronger wait-and-see attitude in the pre-holiday market. Moreover, upstream producers maintained to keep their prices stable at RMB 15,400/mt, and downstream producers took cautious attitude. Market reported limited number of goods priced at RMB 15,250/mt. Market trading sentiment is expected to remain weak in the coming week.

On February 5th, spot transactions were very brisk when zinc prices moved in the RMB 16,600-16,700/mt range, with the interest in stock replenishment rising, since most traders and downstream producers will shut down in advance for the Chinese New Year holiday in the coming week.

SHFE three-month contract zinc prices moved narrowly in the RMB 16,910-17,250/mt range, with positions down slightly. Technically, SHFE three-month contract zinc prices moved below 5-day moving average line, showing signs of falling. Although supply from smelters was still limited, traders began selling off large amounts of zinc for delivery, resulting in sufficient market supply of zinc ingot in the market. SMM predicts zinc market will remain neutral next week.

On Thursday night (February 4th), financial market was affected by fiscal crisis on Euro zone, and US dollar index surpassed the resistance level of 80 caused by market demand to seek dollar as a tool to hedge against financial crisis. In this context, prices of stock market and commodity market both depressed, and LME tin prices fell further sharply below 60-day moving average, and closed at USD 16,050/mt. Recently, LME tin prices trend is more likely affected by other factors as tin price trend received no support from fundamentals. LME tin prices may have difficulty in experiencing previous good performance under context that views are pessimistic over economic recovery and US dollar experiences good performance currently.

On Friday, tin prices fluctuated narrowly in the Shanghai tin market, and prices of major brand tin were in the RMB 135,000-135,500/mt range. Supply of unknown brand tin was very few in the market, and overall trading sentiment remained sluggish. Downstream companies will gradually be off on holiday before the last week of the Chinese New Year Holiday, and purchase of tin ingots will be more sluggish. It is expected that tin prices in the Shanghai tin market will remain stable under the context that LME tin prices may have difficulty in making any breakthroughs.

On Thursday night (February 4th), LME nickel prices opened at 18,200/mt and closed at USD 17,845/mt, with the highest level of USD 18,470/mt and the lowest level of USD 17,651/mt. US dollar surpassed 80, and prices of base metals all declined. LME nickel prices showed a weak performance and fell below original fluctuating range. On Friday, LME nickel prices opened at USD 17,700/mt and fell to test USD 17,595/mt after a slight climb at USD 17,800/mt. Buying was brisk at low-end prices.

Offers were few in the morning session in the Shanghai nickel market, and supply of imported nickel was rare in the market. Only two traders removed relatively a large amount of goods, and offers of imported nickel were basically flat with offers of nickel from Jinchuan Group. Offers of imported nickel were in the RMB 143,000-143,500/mt range, with traded prices in the RMB 142,000-143,000/mt range. Offers of nickel from Jinchuan Group were in the RMB 143,000-144,000/mt range, with mainstream traded prices at RMB 143,000/mt. Goods supplied in the market were mainly from Jinchuan Group, but profit of imported nickel increased as prices of nickel in the overseas market declined. Traders concerned that nickel prices may face risks to drop as tight supply of goods in the market may be eased after the Chinese New Year Holiday.

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


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