SMM Daily Review - 2010/3/2 Base Metals Market

BEIJING, Mar. 3 (SMM)--

Copper

On Tuesday, SHFE June-delivery copper contract opened lowly at RMB 60,190/mt, with prices fluctuating for most part of morning trade. After 9:50 am, SHFE three-month copper contract prices tracked downward, with prices closing at a daily low mark of RMB 59,170/mt. Trading sentiment on the SHFE copper market was brisk for the whole day, with total positions up 536 lots. SMM believes that recent copper price trends were corrections for jumping copper prices seen on March 1st, and SHFE copper prices will likely fall back to RMB 58,000/mt. LME copper prices will drop below 10-day moving average, to return to a previous range of USD 7,150-7,300/mt. 

Low trading sentiment remained in the spot copper market. Falling copper prices on the SHFE market in the morning business made short sellers close their positions, leaving ample market supply. However, some copper smelters chose to stand on the sidelines in view of larger discounts, which were as high as negative RMB 500/mt. Compared with sellers eagerness in moving goods, buyers remained cautious with regard to purchases, depressed by low confidence towards price outlook. In the morning, spot discounts for high-quality copper were at negative RMB 450-500/mt, and standard-quality copper were offered discounts between negative RMB 500-550/mt, and discounts for hydro-copper were around negative RMB 600/mt. Transactions in the morning were mainly done in the RMB 58,450-58,650/mt range, and traded prices were between RMB 58,300-58,600/mt in the afternoon business along with further declines on SHFE copper market and some investors move to look for arbitrage.

Aluminum

SHFE aluminum prices tracked the weak performance of LME aluminum prices, and SHFE 1006 aluminum contract prices opened at RMB 16,985/mt in the morning, losing previous gains, and later mainly moved below the opening prices. The Shanghai Composite Index and other metals prices were sluggish, and SHFE aluminum prices fluctuated lower at noon, but slipped rapidly after 2:00 pm following copper and zinc prices, and hit the 20-day moving average of RMB 16,680/mt, with prices finally closing at RMB 16,685/mt, down RMB 360/mt compared with the previous trading day, or down 2.11%. Total trading volumes were 82,199 lots, and total positions reported 323,270 lots, down 1,550 lots. Technically, SHFE 1006 aluminum contract prices moved below 5-day moving average, with signs of weakening.

Spot market stagnated due to falling aluminum prices, and steady growth in inventories forced some traders to reduce offers, while downstream consumers stayed out of the market, resulting in weakening spot transactions, with traded prices falling from RMB 16,200/mt in the morning to RMB 16,150/mt in the afternoon, and trading volumes faced difficulties to improve.

Lead

Trading sentiment in domestic lead market which was seen improvement was reported lackluster once again, mainly caused by weakening LME markets during Asian trading time, and plunging SHFE copper prices. Downstream producers took a wait-and-see attitude due to concerns of possible declines in lead prices, resulting in low buying interest. Deals in the Shanghai market were in the RMB 15,650-15,750/mt range.

Zinc

SHFE zinc prices opened low and moved lower yesterday, and fell rapidly at noon, and SHFE 1006 zinc contract prices closed at the lowest level of RMB 18,060/mt, with the largest decline of 4.2% among all base metals. Spot market was also at a standstill amid sluggish SHFE zinc market.

#0 zinc was traded around RMB 17,850/mt in the morning in the Shanghai market, while #1 zinc was traded around RMB 17,800/mt, but some smelters held low interest in selling goods at this level, so market supply was mainly from trader inventories and goods for hedging. Downstream producers continued to stand on the sidelines, and almost no deals were made in the spot market in the afternoon, and panic sell-off activity in the SHFE zinc market increased further as a result. However, long sentiment increased when SHFE 1006 zinc contract prices approached RMB 18,000/t, indicating market players remained optimistic toward zinc price outlook, and purchasing sentiment was still bullish at lower prices. Meanwhile, any downward movement for spot zinc prices below RMB 17,500/mt will be limited, so the pessimism should be avoided in the short term.

Tin

On March 1st, LME tin prices received support at USD 17,000/mt after testing high levels, and managed to close at USD 17,025/mt, down USD 49/mt. On March 2nd, LME fell to test USD 17,000/mt due to strengthening US dollar.

Although most upstream companies kept offers at high levels, downstream consumers' purchasing interest was depressed when prices reached RMB 140,000/mt, with wait-and-see sentiment dominating the market. Since some traders had already replenished certain amount of stocks in the previous two days, overall trading sentiment was sluggish on March 2nd. In the afternoon session, inquiries reduced significantly along with declining of LME tin prices. Supply of various kinds of tin ingots increased, indicating more arrivals of goods in the market, and tin prices will face challenges at RMB 140,000/mt.

Nickel

On March 1st, LME nickel prices closed at USD 21,470/mt, up USD 314/mt. Positions were 97,767, and overall trading volumes were moderate. Economic data from the US manufacture sectors were favorable, but lingering debt crisis from the Euro zone triggered market concern. In this context, the Pound and the Euro were both negatively affected, which in turn helped push up metal prices. On March 2nd, LME nickel prices opened at USD 21,520/mt, and prices fell to test USD 21,126/mt, with transactions mainly done at low-end prices.

In the Shanghai nickel market, wait-and-see sentiment was dominating the market due to sluggish performance of LME nickel prices, and fluctuating prices at high levels triggered market players’ concern that prices may experience corrections in the near term. Without confidence, offers were mixed in the market, with traded prices declining gradually. Cargo-holders were eager to move goods in order to maintain profits, and supply of goods were ample in the market, with traded prices of imported nickel in the RMB 155,000-156,500/mt range, and traded prices of nickel from the Jinchuan Group in the RMB 156,000-157,500/mt range. Trading sentiment was relatively sluggish, with transaction mainly done among traders.

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

 
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