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SMM Daily Review - 2010/2/9 Base Metals Market
Feb 10,2010 10:21CST
smm insight
Source:SMM

SHANGHAI, Feb. 10 (SMM) --

Copper
On Tuesday, the May delivery copper contract prices on the SHFE market opened lowly at RMB 52,410/mt, dropping as low as RMB 51,980/mt. After 9:18 am, SHFE three-month copper prices moved upward due to rising stock markets and bargain-hunting interest, with prices finally closing at RMB 53,200/mt, up RMB 560/mt or 1.06% from a day earlier.

As Chinese New Year holiday is coming soon, downstream producers seized the last opportunity to make purchases, and suppliers kept offers firm due to limited availability of goods. In this context, spot premiums were reported at RMB 0-positive 200/mt in the morning trade, and spot premiums reached as high as positive RMB 50-250/mt when a large number of transactions were done. Premiums for high-quality copper were at positive RMB 200-250/mt, with deals mainly done in the RMB 52,950-53,100/mt; premiums for standard-quality copper were positive RMB 50-100/mt, with mainstream traded prices ranging from RMB 52,800-52,950/mt; hydro-copper was set at RMB 0- positive RMB 50/mt. After SHFE copper prices climbed higher in afternoon business, spot buying interest waned following concerns towards upward momentum of copper prices.

SMM believes market transactions in the next two days will drop significantly in view of upcoming Chinese New Year holiday. Hence, copper prices will continue to fluctuate in the short term, and will be affected by financial news. Particular attention should be paid to debt issues in the Euro zone.

Aluminum
SHFE 1005 aluminum contract prices opened at RMB 16,280/mt in the morning session, and later fluctuated higher supported by speculative activity, but failed to break through the 5-day moving average line of RMB 16,500/mt, and finally closed at RMB 16,465/mt, up RMB 185/mt or 1.14% compared with the previous trading day, with the performance better than SHFE copper and zinc prices. Technically, SHFE 1005 aluminum contract prices moved around 5-day moving average line. Spot market was neutral as the Chinese New Year holiday approaches, with deals mainly made between RMB 15,860-15,880/mt.


Lead
Domestic lead market experienced low trading sentiment, as market players generally left for the holiday. Although select downstream producers entered the market for purchases, traded prices kept firm as lead producers maintained prices stable, with limited availability of low-priced goods, helping lead prices advance to around RMB 15,450/mt.

The domestic/LME lead price ratio improved gradually over the past several trading days, with existing ratio around 8, approaching to the level seen in late July of 2009, as domestic lead prices fell at a slower pace than LME lead prices.

Zinc
Yesterday, although SHFE 1005 zinc contract prices have dipped below RMB 17,000/mt, zinc prices rebounded rapidly to RMB 17,000/mt supported by strong buying activity at RMB 16,950-17,000/mt, with prices remaining on an upward track all day. In general, trading sentiment was very brisk on the last trading day of this contract month.

Spot discounts for #0 zinc were RMB 400/mt against SHFE 1005 zinc contract in the Shanghai market, with mainstream traded prices moving in the RMB 16,800-16,850/mt range, while #1 zinc was traded between RMB 16,750-16,800/mt. Spot transactions were general, and downstream purchases were limited. In addition, SMM sources report that traded prices for #0 zinc in Guangdong and Tianjin were higher than Shanghai, with prices for mainstream brand name #0 zinc hovering in the RMB 16,900-17,000/mt range. SMM believes limited supply in Guangdong and Tianjin was due mainly to the reluctance by smelters to move goods, while amply market supply in Shanghai was mainly goods for hedging or goods from stocks held by traders. SMM believes the decreasing supply in some regions will likely ease after the Chinese New Year holiday. 

Tin
After hitting the resistant level at 80.5, US dollar gradually declined and prices of base metals gradually advanced after decline. On Monday (February 8th), LME tin prices advanced slightly by USD 200/mt as buying increased when prices were low. On Tuesday, LME tin prices fluctuated narrowly in the USD 15,200-15,400/mt range and LME tin price trend was not clear in the short term. Upward momentum of US dollar was weak recently, and US dollar may fluctuate to decline. In this context, any downward room for LME tin prices will be limited.

In the Shanghai tin market, tin prices were flat with previous day’s level. Tin from Yunnan Tin group was traded in the RMB 134,000-134,500/mt range and tin from Yunnan Chengfeng Non-ferrous Metals was traded at RMB 133,500/mt. Trading sentiment became more and more sluggish with the approach of Chinese New Year holiday. Prices will mainly remain stable before the Chinese New Year Holiday.

Nickel
On Monday (February 8), LME nickel prices opened at USD 17,105/mt and closed at USD 17,110/mt, with highest level at USD 17,398/mt and the lowest level at USD 16,976/mt. US dollar continued to decline, and base metal prices were inspired to advance slightly. The significant decline of LME nickel prices caused by panic market sentiment has already come to an end and LME nickel prices were on downward track of bull, so any downward room for LME nickel prices will gradually become narrow. On Tuesday, LME nickel prices opened at USD 17,300/mt. Prices gradually climbed to USD 17,500/mt and continued to fluctuate narrowly after testing USD 17,050/mt.

In the Shanghai nickel market, many traders were closed as many of them have gradually called back cash at the year end. Offers of imported nickel and nickel from Jinchuan Group remained flat with level of previous day. Nickel from Jinchuan group dominated transactions, with traded prices in the RMB 141,000-141,500/mt range. Trading sentiment was relatively stable, as downstream companies purchased raw materials for production during the Chinese New Year Holiday. It is expected that most traders will be closed from Wednesday, and nickel prices will not fluctuate widely if LME nickel prices fluctuate slightly.

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

 

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