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SMM Daily Review - 2010/2/26 Base Metals Market
Mar 1,2010 11:07CST
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SHANGHAI, Mar. 1(SMM) --


On February 25th, base metals prices moved lower. LME copper prices closed at USD 7,070/mt, down USD 90/mt. On Friday, the June delivery copper contract opened lowly at RMB 58,210/mt, and then widely moved around the yesterday’s closing level. After 10:30 am, copper prices plunged, reaching as low as RMB 57,910/mt. In the afternoon business, price declines on the SHFE copper market narrowed, with prices finally ending at RMB 58,190/mt, down RMB 170/mt or 0.29% from a day earlier.

In the spot market, discounts continued to expand. In the morning, discounts for goods from Jiangxi Copper were in the range of negative RMB 400-350/mt, and discounts were negative RMB 450/mt for standard-quality copper, and hydro-copper were offered discounts at negative RMB 500/mt. After 10: 35 am, spot discounts slightly narrowed following price declines on the SHFE copper market, but remained large. On Friday, spot discounts for high-quality copper were at negative RMB 350-300/mt, with deals mainly done in the RMB 57,200-57,550/mt range; discounts for standard-quality copper were at negative RMB 450-350/mt, with transactions mainly between RMB 57,100-57,300/mt.

Traders said larger spot discounts were mainly due to rising copper inventories during the Chinese New Year holiday. According to SHFE, copper inventories soared by 32,309 mt over the week. In addition, some downstream producers were still closed for holiday, and rising LME copper prices during the holiday resulted in a strong wait-and-see attitude among purchasers, leaving weak buying interest in the spot market.

SMM believes LME copper prices will move in the USD 6,950-7,350/mt range in the short term, waiting for further market direction. Particular attention should be paid to copper consumption in China, the issue of debts in some EU countries, as well as new economic data from the US. Technically, copper prices will feel pressure in the short term, and attention should be paid to copper price performance at USD 6,950/mt.


SHFE 1005 aluminum contract prices opened low at RMB 16,740/mt on February 26th, and later rebounded to the highest level of RMB 16,840/mt, but faced strong pressure at 60-day moving average. SHFE aluminum prices remained sluggish all day, and hit the lowest level of RMB 16,710/mt, with prices finally ending at RMB 16,730/mt, down RMB 145/mt, or down 0.86%. Technically, SHFE 1005 aluminum contract prices moved below 5-day moving average, showing signs of fluctuating lower.

In the spot market, downstream consumption has not fully recovered, and downstream purchasing interest was heavily affected by falling aluminum prices, so transactions were generally sluggish during the week of February 22-26, with spot discounts moving in the RMB 150-200/mt range.


On Friday, trading sentiment in domestic lead market failed to improve. Although most lead producers continued to maintain prices at RMB 16,000/mt, a limited number of producers made some concession in prices. Coupled with high selling interest among traders, traded prices reduced further today, with deals done in the RMB 15,600-15,900/mt.

Market players generally hope that market trading sentiment could pick up after the Lantern Festival, when downstream producers are expected to resume production. However, pessimistic outlook remains strong in the market due to falling lead prices on the LME market.


SHFE zinc prices fluctuated narrowly after opening low, and SHFE three-month zinc contract prices hit the highest level of RMB 18,560/mt, and touched the lowest level of RMB 18,350/mt, and trading sentiment was very bullish, with struggles between long and short positions intensifying. However, spot market sentiment was not as brisk as expected on the last trading day of the week of February 22-26 despite of market optimistic sentiment with regard to consumption in early March, and downstream buying interest remained low as well.

#0 zinc was traded around RMB 17,900/mt in the Shanghai market, and imported zinc and #1 zinc were traded around RMB 17,850/mt limitedly. Producers held low interest in moving goods at low-end prices, resulting in limited spot supply. However, it is worth noting that mainstream traded prices and SMM prices for #0 zinc both have fallen below RMB 18,000/mt after spot zinc prices tested the support level of RMB 18,000/mt for three days. Although market struggles concerning market outlook were intensifying, any downward room for spot zinc prices below RMB 18,000/mt will be limited in the long term.


Worse-than-expected economic data from the US triggered market concerns over recovery of world economy. On February 25th, LME tin fluctuated on downward track, and closed at USD 16,755/mt, down USD 145/mt, with highest level reaching USD 17,165/mt and lowest level touching at USD 16,675/mt. On February 26th, LME tin prices were depressed under 5-day moving average, with prices moving below USD16,900/mt and fluctuating in the USD 16,750-16,850/mt range.

In the Shanghai tin spot market, trading sentiment was extremely sluggish. Supplier still kept high offers, but response from downstream consumers was not positive. Purchasing interest from downstream consumers was depressed due to price increases. It was expected that tight supply of goods may be eased next week, so wait-and-see sentiment was relatively strong in the market. Transactions were mainly made from goods from Yunnan Tin group and Yunnan Chengfeng Non-ferrous Metals Co., Ltd, and there were few transactions in the market reached on an as-needed basis, with traded prices in the RMB 138,000-139,000/mt range.


On February 25th, LME nickel prices opened at USD 20,350/mt and closed at USD 20,245/mt, down USD 28/mt, with highest level at USD 20,699/mt and lowest level at USD 20,245/mt. On February 26th, LME nickel prices opened at USD 20,375/mt, with prices climbing to test USD 20,700/mt due to support of falling USD dollar index and dropping to test USD 20,345/mt. Performance of USD dollar was stable, with prices fluctuating at high levels, and market players adopted a wait-and-see attitude.

In the Shanghai nickel market, supply of goods was still relatively ample in the market, and traded prices were stable. Although supply was ample, low-priced goods were few. Trading volumes were relatively brisker compared with that on February 25th, with imported nickel from Russia traded at RMB 151,000/mt and nickel from Jinchuan Group traded at RMB 152,000/mt. Trading volumes of imported nickel were better than that from Jinchuan, and end-users continued to enter into the market to replenish stocks. Trading sentiment was still sluggish in domestic nickel market, and trading sentiment of refined nickel will become stagnant again when supply of NPI increase in the market.

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

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