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SMM Daily Review - 2010/2/24 Base Metals Market
Feb 25,2010 11:40CST
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SHANGHAI, Feb. 25 (SMM) --

SHFE 1006 copper contract prices recovered slowly after opening at RMB 57,800/mt affected by falling three-month LME copper contract prices, and kept moving in the RMB 58,000-58,400/mt range after 9:50, with prices finally ending at RMB 58,320/mt, down RMB 430/mt.

In the spot market, spot discounts for high-grade copper were RMB 200-250/mt in the morning session, but later widened dramatically due to large amounts of sell-offs and sluggish downstream demand. Discounts for high-grade copper expanded to above RMB 350/mt, with mainstream traded prices in the MRB 57,600-57,800/mt range, while discounts for standard-grade copper were RMB 350-450/mt, with mainstream traded prices in the RMB 57,550-57,650/mt range. Market transactions remained weak.

According to the General Administration of Customs (GAC), China's imports of copper concentrate were 598,146 mt during January, up 18.8% YoY. China's imports of refined copper were 196,926 mt during January, up 9.11% YoY, but down 19.3% MoM, lower than market expectations, since large amounts of imported copper were piling up in bonded warehouses due to falling SHFE/LME copper price ratio in 2H 2009, and the outflow of goods from bonded warehouses helped ease the demand for imports to some extent after the SHFE/LME copper price ratio recovered gradually since December. Chinese consumption remained weak after the holiday, and recent copper prices will still be affected by LME copper prices.

SHFE aluminum prices tracked LME aluminum price trends, and SHFE 1005 aluminum contract prices opened at RMB 16,800/mt, again moving below RMB 17,000/mt, with the highest level at RMB 16,925/mt. Downstream consumption remained weak, and the pessimistic sentiment emerged in the market, and trading volumes reported less than 100,000 lots. SHFE 1005 aluminum contract prices finally closed at RMB 16,830/mt, down RMB 205/mt compared with the previous trading day, or down 1.2%. Technically, SHFE 1005 aluminum contract prices fluctuated below 5-day moving average, showing signs of declining. Aluminum prices tended to decline in the spot market, and aluminum inventories continued to increase, and downstream consumption was sluggish, with offers quoted by traders down gradually. Hence, aluminum market will remain lukewarm in the near future.

In domestic lead market, most market insiders believed that lead prices will be on downward track. Although domestic lead prices fell along with LME lead prices, few buyers made purchases at low prices. Most downstream producers still consumed their previous inventories and didn't take initiative to make purchase in the market, despite the fact that few downstream producers will resume production after the Lantern Festival. In this context, actual buying in the market was weak, and transactions were few, with low-end prices below RMB 16,000/mt. It was reported that most traders and downstream producers were willing to accept offers below RMB 16,000/mt. However, once LME lead prices fall into fluctuation situation, domestic lead prices will struggle at RMB 16,000/mt.

SHFE zinc prices opened at RMB 18,450/mt negatively affected by falling LME zinc prices, but later moved higher after domestic A-shares recovered to 3,000, with prices finally ending at RMB 18,540/mt. Positions increased by more than 20,000 lots to 123,400 lots. SHFE 1006 zinc contract became the dominant contract yesterday, and kept moving narrowly, with performance stronger than previous two days. As a result, spot zinc prices stabilized above the RMB 18,000/mt mark.

Yesterday, #0 zinc was traded in the RMB 18,000-18,050/mt range, with offers at RMB 17,980/mt also heard in the market, but trading volumes were limited. #1 zinc was traded between RMB 17,950-18,000/mt, but market supply was very limited, since smelters were reluctant to sell goods. Overall trading sentiment was lukewarm yesterday due to low downstream purchasing interest. Technically, SHFE three-month contract zinc prices moved below 5-day moving average, showing signs of falling. However, any downward movement for zinc prices will be limited given weak spot zinc transactions and smelters' reluctance to sell goods.

On February 23rd, LME tin prices continued to show strong upward momentum, with prices soaring to USD 17,300/mt due to concerns over reducing LME tin inventories. However, prices declined after surge and closed at USD 16,725/mt, down USD 375/mt, due to concerns over vulnerable recovery of US economy after release of unfavorable US economic data. On February 24th, LME tin prices fluctuated narrowly around USD 16,700/mt.

Traditionally, domestic tin concentrate producers always resume production after the Lantern Festival. In addition, there are some uncertainties in domestic tin concentrate market. In this context, domestic tin smelters that need to purchase tin concentrate almost avoid to buy tin concentrate before the Lantern Festival. On February 24th, there was no supply of tin from Yunnan Tin group, and cargo-holders with tin from Yunnan Chengfeng Non-ferrous Metals Co., Ltd and Yunnan Gejiu Zili Metallurgy Co., Ltd took the opportunity to lift offers to RMB 138,000/mt, due to high costs and insufficient inventory. Downstream consumers still made purchases in a small amount on an as-needed basis, and overall trading sentiment was sluggish.

On February 23rd, LME nickel prices opened at USD 20,400/mt and closed at USD 20,129/mt, with highest level at USD 20,734/mt and lowest level at USD 19,956/mt. LME nickel prices fell by USD 346/mt and continued to be on downward track. LME nickel prices opened at USD 20,102/mt in the morning session on February 24th, with prices testing the highest level at USD 20,225/mt and testing the lowest level at USD 20,100/mt.

In the Shanghai nickel market, offers were relatively mixed in the morning session. Supply of goods was ample in the market, but supply of low-priced offers reduced. In this context, declining pace of traded prices lowered. As many market players adopted a wait-and-see attitude, overall trading volumes declined. Imported nickel was traded at RMB 150,000/mt, but low-priced transactions at RMB 149,500/mt were also heard in the market. Nickel from Jinchuan Group was traded in the RMB 150,000-151,000/mt range. Cargo-holders, who had products (excluding tax) stored in other regions, had high interest to move goods. 
To contact the writer on this report: angelawang@smm.cn


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