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SMM Daily Review - 2010/2/12 Base Metals Market
Feb 22,2010 10:27CST
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SHANGHAI, Feb. 22 (SMM) --

On February 12th, SHFE 1006 copper contract opened at RMB 56,410/mt in the morning session, and soared to RMB 56,800/mt, but later fell to below RMB 56,000/mt following LME copper prices, and then kept moving around RMB 56,000/mt. SHFE copper prices stabilized in the afternoon, with prices mainly hovering in the RMB 56,250-56,350/mt range, and with prices finally ending at RMB 56,450/mt. Trading volumes were very limited on the last trading day before the holiday restricted by transportation, warehouse, and banks. In addition, significant growth in copper prices prior to the holiday also depressed downstream purchasing interest, resulting in limited transactions.

Spot discounts for high-grade copper were RMB 0/mt offered by limited traders in the morning session, but no deals were made. A limited number of traders reduced offers in orders to move goods, with spot discounts for high-grade copper expanding to RMB 80/mt, and spot discounts for standard-grade copper at RMB 500/mt. Mainstream traded prices moved between RMB 55,750-56,050/mt, and offers for hydro-copper were limited, and spot discounts for hydro-copper were RMB 200-250/mt, with traded prices moving in the RMB 55,650-55,750/mt range.

SHFE 1003 copper contract prices moved steadily in the afternoon, but spot traders shut down for holiday in the Shanghai market, and market transactions were at a standstill as a result. Transactions also stagnated in other regions, and only limited number of downstream producers purchased goods to meet production need on the last trading day. Offers were mixed in the market, and mainstream traded prices were above RMB 56,000/mt in China.

On February 12th, SHFE 1005 aluminum contract opened at RMB 16,690/mt positively affected by soaring base metals prices, and later moved higher all the way to break through 60-day moving average, but lackluster trading sentiment on the last trading before the holiday depressed the upward momentum for SHFE aluminum prices. In the context, SHFE 1005 aluminum contract prices failed to advance to RMB 17,000/mt, with prices hitting the highest level of RMB 16,930/mt. SHFE aluminum prices dipped to RMB 16,600/mt before closing due to sell-off activity, with SHFE 1005 aluminum contract prices closing at RMB 16,825/mt, up RMB 145/mt compared with the previous trading day, or up 0.87%.

Transactions were very lukewarm in the spot market before the holiday. Base metals prices have shown strong performance before the Chinese New Year holiday, and the market concerns over the credit rating crisis in the Euro zone will not disappear in the short term, so aluminum prices will likely follow other metals prices trends, waiting for the consumption recovery after the holiday and the recovery of market expectations. 

On February 11th, base metal prices which were heavily weighed by US dollar previously gradually rebounded. LME lead prices reached the highest level at USD 2,132/mt and received support at the lowest level at USD 2,040/mt, with price finally closing at USD 2,129/mt. Trading sentiment was sluggish on February 12th, and LME lead prices were fluctuating narrowly with other base metals, seeking for future directions.

In the domestic spot market, trading sentiment was most sluggish at the last trading day before the Chinese New Year Holiday with almost no offers in the morning session in the market, as most traders and downstream producers were off on holidays. However, as most producers and traders were optimistic towards prices performance in the future, offers were relatively firm on February 12th, and traded prices were heard again to stand above RMB 16,000/mt. Whether lead prices can stand firmly above RMB 16,000/mt or not shall depend on the performance of LME lead prices during the Chinese New Year Holiday.

On February 12th, market sentiment was lackluster on the last trading day before the Chinese New Year holiday, and most domestic traders and downstream producers showed little interest in transactions. #0 zinc was traded around RMB 17,900/mt, and #1 zinc was traded around RMB 17,850/mt.

SHFE zinc prices remained strong, and SHFE 1005 zinc contract prices opened at RMB 18,350/mt, but weak market trading sentiment and strengthened US dollar limited the upward room for zinc prices to move higher. SHFE 1005 zinc contract prices received pressure at 20-day moving average, and will consolidate around RMB 18,000/mt technically. Cautious attitude should be taken toward whether or not zinc prices rebound strongly after the holiday.

Overseas investors were more optimistic towards China's economy based on CPI and PPI released on February 11th, and concern over inflation was eased temporarily. In this context, prices of base metals all climbed up. On February 11th, LME tin price hit the highest level at USD 16,250/mt and touched the lowest level at USD 15,810/mt, with prices closing at USD 16,200/mt. It is expected that US dollar will still under pressure to stand firm above 80 despite of fluctuations around this level, and base metal prices will no longer be depressed temporarily. In this context, LME tin prices will have room to rebound further.

Trading sentiment was extremely sluggish on February 12th, and traders were almost closed for holidays. Offers from SMM were in the RMB 133,500-135,000/mt ranges, with few actual transactions being heard in the market.

On February 11th, LME nickel prices opened at USD 17,875/mt and closed at 18,575/mt, with highest level at USD 18,600/mt and lowest level at 17,851/mt. China's CPI was 1.5%, which helped ease concern over inflation temporarily, with base metal prices all climbing and nickel prices exceeding resistance level of USD 18,500/mt. On February 12th, LME nickel prices opened at USD 18,550/mt, and prices fluctuated on upward track later.

In the Shanghai nickel market, Jinchuan Group raised ex-works nickel prices by RMB 2,000/mt to RMB 145,000/mt again. Traders were all closed for holidays, with no transactions reported.

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


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