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SMM Daily Review - 2010/2/22 Base Metals Market
Feb 23,2010 10:21CST
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SHANGHAI, Feb. 23 (SMM) --

On February 22nd, SHFE 1006 copper contract prices opened at RMB 60,060/mt, and moved higher to RMB 60,080/mt immediately after opening, but later fell below RMB 60,000/mt rapidly, with prices mainly moving in the RMB 59,100-59,300/mt range all day. SHFE copper prices declined further in the afternoon due to falling domestic A-shares markets, with prices finally ending at RMB 59,020/mt.

A relatively large number of traders offered prices in the morning session in view of rising SHFE copper prices. In this context, spot discounts expanded, with discounts for high-grade copper at RMB 300/mt, but later discounts narrowed slightly due to falling SHFE copper prices. After 10:30, spot discounts for goods from Jiangxi Copper were RMB 250/mt, while discounts for other high-grade copper were between RMB 250-300/mt. Discounts for standard-grade copper were in the RMB 300-400/mt range, while discounts for hydro-copper were RMB 400-450/mt. Buyers were cautious about the rising spot copper prices, and the falling SHFE copper prices also generated market concerns over further prices, both resulting in weak transactions. As SHFE copper prices fluctuated narrowly, so traded prices for refined copper moved in the RMB 58,650-58,900/mt range. SHFE copper prices remained weak in the afternoon, and spot discounts did not narrow despite of sluggish transactions, with traded prices declining slightly to the range of RMB 58,600-58,800/mt.

Yesterday, downstream consumption was moderate, since some downstream producers planed to be operational after March, while some producers have purchased enough goods prior to the holiday to meet their production needs. Meanwhile, the uncertainties in copper prices also limited their interest in stock replenishment.

According to the result of a SMM survey, market struggles with regard to further price trends intensified. The pessimistic market players said China’s central bank raised the deposit reserve ratio constantly, indicating that Chinese government intends to curb lending and ensure the healthy development of monetary policy, which in turn helps limit the speculative funds in futures and stock markets. Meanwhile, most downstream consumers will begin operation after March, which hamper the upward momentum of copper prices, and cautious sentiment emerged in the market as a result. The optimistic market players said global economic recovery will remain strong in 2010, and the steady growth in LME copper prices also suggested market confidence in copper price increases. The neutral market players said copper prices have hit the highest level after this round of increases, and there is little possibility copper prices will rise further or fall significantly, and they believe copper prices will stand at USD 7,000/mt, and will continue to fluctuate at current levels.

International commodity prices advanced during the Chinese New Year holiday stimulated by positive US economic data, and LME aluminum prices recovered to USD 2,145/mt from USD 2,050/mt, with a cumulative growth exceeding 4.5%. SHFE aluminum prices opened high but went lower. SHFE 1005 aluminum contract prices dipped to USD 16,900/mt, with the highest level of USD 17,485/mt. SHFE aluminum prices stood above 60-day moving average line, and broke through 30-day moving average line, but will continue to test this line due to shortages of upward momentum, and SHFE 1005 aluminum contract prices will try to stand above RMB 17,000/mt again.

Futures and stock markets and LME markets dropped, heavily depress the long sentiment in the market. In addition, downstream consumers remained closed. In this context, the wait-and-see sentiment prevailed among market players yesterday, and transactions were very limited, with spot aluminum prices falling from RMB 16,500/mt to RMB 16,450/mt, but traders refused to further reduce aluminum offers in anticipation of aluminum price increases in the future.

LME lead prices closed with gains for 5 consecutive days during the Chinese New Year Holiday, with an accumulative rise by 10.43%. On February 22nd, LME lead prices fluctuated widely after opening, with prices once touching as low as USD 2315.3/mt in the morning session. In the afternoon session, prices reached as high as USD 2,368/mt and fluctuated in the USD 2,350-2,365/mt range. It is expected that LME lead prices will experience corrections in recent term, and will be affected by price trend of copper, zinc and other base metals.

In the domestic lead market, lead prices advanced along with rising price trend of LME lead prices, but transactions were still sluggish as the situation during the pre-holiday period. Some downstream producers still haven't resumed production, and producers that have already resumed production were not eager to make purchase as they had already replenished stock before the Chinese New Year Holiday. In this context, overall trading sentiment was sluggish. In the first trading day after the Chinese New Year Holiday, offers of domestic lead rose significantly by RMB 500/mt, but prices were weak in overseas market, leading wait-and-see sentiment in the market. However, smelters were optimistic toward future price trend, and they kept offers firm. Transactions were mainly made in the RMB 16,300-16,500/mt in the spot market.

Yesterday was the first trading day after the Chinese New Year holiday, and LME zinc prices have risen for five consecutive days, and optimistic market sentiment was very high, so SHFE three-month zinc contract prices opened above the 60-day moving average line at RMB 19,480/mt, but later SHFE zinc prices fell rapidly due to the profit-taking by long players, with prices moving below daily moving average all day, and the wait-and-see sentiment emerged in the spot market as a result.

Yesterday, #0 zinc was traded at RMB 18,450/mt, with discounts at RMB 350-400/mt again SHFE three-month zinc contract; #1 zinc was traded at RMB 18,400/mt. Trading volumes were very limited, since downstream producers remained closed, and the falling SHFE zinc prices also limited the purchasing interest by downstream producers who planed to replenish stocks this week, and LME zinc prices ended the upward trend, exerting heavy pressure on spot zinc market.

Technically, SHFE zinc prices will climb further in the coming week, but the weak spot zinc market before March will help limit the upward room for SHFE zinc prices to move higher.

LEM tin prices have been climbed for 7 consecutive days during the Chinese New Year Holiday, with prices touching the lowest level at UDS 15,975/mt and reaching the highest level at USD 17,000/mt, with total gain of USD 800/mt. On February 22nd, LME tin prices fluctuated narrowly around USD 17,000/mt.

In the Shanghai tin market, there were only few inventories of tin ingots as traders were reluctant to built high stocks for the uncertainties during the long holidays. In this context, major brand offers like Yunnan Tin group and Yunnan Chengfeng Non-ferrous Metals Co., Ltd that dominated market supply all kept firm offers, with prices at RMB 138,000/mt. There were many inquires from downstream consumers on the first trading day after the Chinese New Year Holiday, but only few of them who didn’t build stock before the Chinese New Year Holiday made a few purchases. Cargo-holders were reluctant to lower offers, with mainstream treaded prices in the RMB 137,000-137,500/mt. Some trader offered long-term prices at RMB 133,000/mt, and the overall trading sentiment was sluggish in the Shanghai tin market.

On February 19th, LME nickel prices opened at USD 20,300/mt and closed at USD 20,650/mt, with the highest level at USD 20,735/mt and the lowest level at USD 20,050/mt. US economic data were positive last week, stimulating recovery of commodity prices. Nickel prices stood above USD 20,000/mt, and LME nickel prices opened at USD 20,600/mt on February 22nd, with prices fluctuating around USD 20,550/mt later. Market players were concerned that prices may decline, and they were not unwilling to increase buying when prices were high.

Although Jinchuan Group has consecutively lifted ex-works nickel prices from RMB 13,000/mt to RMB 158,000/mt, purchasers were not eager to make purchase along with the soaring prices. Most traders were willing to move goods due the high profit they acquired, and the supply of goods was increased in the market. However, downstream consumers adopted a wait-and-see attitude, and overall trading sentiment was sluggish. Imported nickel was traded at RMB 155,000/mt, and nickel from Jinchuan Group were traded in the RMB 155,000-156,000/mt in the Shanghai market. Nickel from Jinchuan Group was traded at RMB 158,000/mt in Guangdong region, but with few transactions.

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


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