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SMM Daily Review - 2010/3/1 Base Metals Market
Mar 2,2010 09:50CST
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SHANGHAI, Mar. 2 (SMM) --


SHFE three-month copper contract surged at the open on Monday, with prices rising by its 5 percent daily limit, reaching as high as RMB 61,150/mt, but later moved narrowly in a lower range of RMB 60,150-60,500/mt. At the end of trading, the June delivery copper contract on the SHFE market climbed higher due to support from optimistic outlook, with prices finally closing at RMB 60,780/mt, up RMB 2,540/mt or 4.36% compared with the previous trading day.

In the spot market, spot discounts expanded further in the morning session along with jumping copper prices on the SHFE market. Discounts for high-quality copper were at negative RMB 450-500/mt, with deals mainly done in the RMB 59,200-59,450/mt range; discounts for standard-quality copper were at negative RMB 500-550/mt, with transactions reported between RMB 59,200-59,450/mt; discounts for hydro-copper were around negative RMB 600/mt. A massive earthquake in Chile created market optimistic outlook, reducing suppliers selling interest. Lower selling interest, coupled with soaring copper prices and expanded spot discounts, resulted in limited market supply. However, downstream purchasing interest remained soft, leading to weak trading sentiment.

According to a SMM survey, market players are divided on opinions of price trends for this week, with the number of pessimists, optimists and neutralists almost on a bar. Pessimists believe that a surge of 30 kt of inventories in Shanghai indicated slow recovery in actual consumption. Impact from Chile’s earthquake on market supply will be limited, and market speculations over the earthquake resulted in jumping copper prices. Copper prices will return to normal levels once speculations are waning; optimistic market players acknowledge that the global economy is now on the track of recovery, and a traditional peak demand period will arrive in China from March. Copper prices now are on a fluctuating track, and expectations of falling supply from Chile’s earthquake will stimulate copper prices; neutralists believe currently market fundamentals and financial factors are both affecting copper market, with limit possibility that copper prices will experience marked declines or increases, and expect copper prices will continue to fluctuate at high levels.


SHFE aluminum prices opened high, but moved lower, with prices mainly fluctuating below the moving average. Positions of SHFE 1006 aluminum contract increased by 7,524 lots, and SHFE 1006 aluminum contract prices tested the support level of RMB 17,000/mt yesterday, and closed at RMB 17,005/mt. SHFE spot-month aluminum contract prices dipped to RMB 16,430/mt, with prices mainly moving around RMB 16,500/mt.

In the spot market, spot aluminum prices were flat at last Friday levels, getting support at RMB 16,200/mt, and deals were made around RMB 16,220/mt, with spot discounts expanding above RMB 200/mt. Downstream consumers still stayed out of the market, but most smelters were optimistic toward future consumption and price trends. Market players believe the recovery in demand will help support aluminum prices, but the oversupply will limit the upward momentum for aluminum prices in the short term. 


Trading sentiment on Monday picked up from previous level due to improved operations at downstream producers, with growing market inquiries, and this may be a sign of new round of downstream purchases. However, some producers said slow recovery of operations due to flow of employees, causing slow consumption of stock replenishment made before the holiday. In this context, a new round of purchases is expected to get underway at a slower pace. In addition, sentiment of holiday season is still remain in some regions, and with no deals reported, though some producers continued to maintain prices at RMB 16,000/mt. Market supply was mainly from traders, with prices mainly in the RMB 15,700-15,800/mt range.


SHFE zinc prices moved higher following copper price trends yesterday, and advanced rapidly to the highest level of RMB 19,180/mt after opening at RMB 19,000/mt, but spot zinc market reported no marked improvement. SHFE zinc prices faced the sell-off pressure, and SHFE 1006 zinc contract prices closed at RMB 18,775/mt, up RMB 320/mt compared with the previous trading day, or up 1.73%.

Yesterday, #0 zinc was traded between RMB 18,150-18,200/mt, while #1 zinc was traded at RMB 18,100-18,150/mt. Although yesterday was the first trading of March, downstream purchasing interest was general, but did not have high interest in building stocks due to the Chile earthquake, indicating orders received by zinc downstream producers have not increased significantly, and the raw materials held by these producers were enough to meet production needs, so they had low interest in stock replenishment. However, most market players were optimistic toward zinc market outlook, since zinc downstream industries will recover in March, and trading sentiment in zinc spot market will improve gradually in response.


On February 26th, LME tin prices broke through 5-day moving average and moved upward after fluctuating at low levels of USD 16,700/mt, and closed at USD 17,100/mt, up USD 345/mt. On March 1st, LME tin prices still rallied after opening, but gradually declined after testing USD 17,300/mt.

In the Shanghai tin spot market, prices were boosted along with LME tin prices. Although traders tried to replenish stocks last week, supply was still insufficient in the market. On one hand, producers firmly believed that tin prices will rally in the future, so they kept offers above RMB 140,000/mt. In this context, traders were reluctant to move goods as they were afraid of difficulty in replenishing stocks at low levels. On the other hand, purchasing volumes from downstream producers that gradually resumed production increased. Trading volumes increased on March 1st, with traded prices in the RMB 138,500-140,000/mt range, with tin from Yunnan Tin group dominating market transactions.


On February 26th, LME nickel prices opened at USD 20,375/mt and closed at USD 21,156/mt, up USD 711/mt, with highest level at USD 21,175/mt and lowest level at USD 20,350/mt. Affected by favorable economy data from the US and copper price hikes caused by earthquake in Chile, LME nickel prices opened at USD 21,188/mt, indicating relatively strong performance, with highest level at USD 21,600/mt and lowest level at USD 21,200/mt. It is widely believed in the market that nickel prices will be relatively strong this week.

In the Shanghai nickel market, market players mainly adopted a wait-and-see attitude in the morning session due to rapid climb of LME nickel prices. With offers gradually advancing, traded prices climbed significantly from the levels last Friday. Supply of low-priced offers were hardly seen in the market, with imported nickel from Russia traded at RMB 157,000/mt and nickel from Jinchuan Group traded at RMB 158,000/mt. Transactions were relatively brisk, but were mainly made among traders. Most traders still adopted positive view towards nickel price trend.

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


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