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

BEIJING, Mar.4 (SMM) --

Copper

On Wednesday, major copper contracts on the SHFE market opened higher, but fell later, with brisk trading sentiment, resulting in slight declines in total positions. SHFE June-delivery copper contract opened at RMB 60,000/mt, and closed at RMB 59,660/mt, down RMB 70/mt or 0.12% from a day earlier. The June-delivery copper contract on the SHFE market reached as high as RMB 60,050/mt, and hit the lowest level of RMB 59,410/mt. Trading volume for SHFE three-month copper contract was 290,300 lots, with total positions at 209,892 lots, and trading value was at RMB 86.687 billion.

Discounts remained in the spot copper market, with levels between negative RMB 450- 350/mt in the morning trade. Discounts narrowed slightly during the major trading period. Discounts for high-quality copper were at negative RMB 300-400/mt, with deals mainly done in the RMB 58,600-58,800/mt; discounts for standard-quality copper were at negative RMB 450-400/mt, with mainstream traded prices in the RMB 58,550-58,650/mt range; discounts for hydro-copper were at negative RMB 500-450/mt. Traders said current market supply was ample, and downstream producers generally consumed their inventories, with no significant improvement in consumption.

On the 13th session of the 11th NPC Standing Committee (ended on February 26th), the National Development and Reform Commission (NDRC) said China will take four measures to develop green, low-carbon economy, and implement various policies in low-carbon energy, with non-ferrous metals industry involved. In this context, base metals prices will continue to fluctuate at high levels.

Aluminum

SHFE aluminum prices fluctuated wildly, and SHFE 1006 aluminum contract prices soared to RMB 16,910/mt in the morning, but later dipped to RMB 16,805/mt, with prices closing at RMB 16,825/mt. SHFE 1006 aluminum prices closed down in the afternoon, and its positions declined by more than 2,900 lots, while positions of SHFE 1005 aluminum contract also declined by 2,500 lots. SHFE 1006 aluminum contract prices again fell to a range of 20-day and 30-day moving averages, and struggles between long and short positions intensified, with short positions relatively stronger.

In the spot market, downstream consumers who stayed out of the market after the holiday began to purchase goods in view of limited downward movements in aluminum prices, and market supply was sufficient, but suppliers were cautious about significant price reduction, and traded prices moved around RMB 16,180/mt, with spot discounts of RMB 200/mt reported to be narrower compared with a day earlier. A limited volume of imported aluminum from Russia appeared in the market, but offers for these goods at RMB 16,120/mt failed to have price advantages, leaving almost no negative impact on aluminum market.

Lead

A wait-and-see attitude remained among domestic downstream producers due to depressed LME lead market performance during Asian trading time. Inquires on Wednesday improved from yesterday’s level, but with limited transactions, and deals were mainly done in the RMB 15,700-15,900/mt range.

According to a SMM survey over the past two days, more and more downstream producers suffered problems of recruitment, which directly affected operating rates at those producers. It may be the reason behind no new round of downstream purchases after the Chinese New Year holiday.

Zinc

SHFE zinc prices opened low and went lower yesterday, and SHFE three-month zinc contract prices moved around RMB 18,250/mt narrowly following stabilizing copper prices, with prices finally closing at RMB 18,255/mt, and short positions declined significantly. The spot zinc market was bullish compared with previous two trading days due to stabilizing SHFE zinc prices, and both downstream producers and traders increased purchases.

Yesterday, #0 zinc was traded around RMB 17,650/mt, with discounts at RMB 550-600/mt against SHFE 1006 zinc contract, and #0 zinc was mainly traded around RMB 17,700/mt; traded prices for #1 zinc were RMB 30-50/mt lower than #0 zinc prices, but market supply of #1 zinc remained limited. Market players have accepted the spot zinc prices in the RMB 17,500-17,700/mt range, and although some downstream producers were still consuming their existing inventories built before the holiday, trading sentiment will be brisk in the market as long as SHFE zinc prices stabilize and spot zinc prices are lower than RMB 17,800/mt. In this context, market players remained optimistic toward domestic consumption in 2Q. 

Tin

On March 2nd, LME tin prices opened low, but climbed higher later, with prices fluctuating narrowing and growing from USD 16,920/mt to USD 17,100/mt. LME tin prices later closed at USD 17,050/mt, down slightly by USD 11/mt. On March 3rd, LME tin prices still slightly above all moving averages on electronic trading, with stronger performance compared with other base metals.

In the Shanghai tin spot market, producers still kept offers high, totally ignored that fact that transactions were not brisk when offers were high yesterday. Since prices of tin ore will remain high in the near term due to supply shortage, producers kept certain amount of inventories on hand with expectation of price increases in the future. Goods moved by traders increased in the market, as traders' interest to move goods was slightly high. Traders quoted offers cautiously, but downstream consumers were still hesitant to make purchases at prices offers by traders, with transactions mainly made  from small amount purchases on an as-needed basis. Transactions of goods from Yunnan Tin group, Yunnan Gejiu Zili Metallurgy Co.,Ltd, Guangxi Pinggui Feidie Co., Ltd, Nanshan Tin Solder Co., Ltd, Yunnan Chengfeng Non-ferrous Metals Co., Ltd and Huaxi Group were depressed due to high offers from these companies.

Nickel

On March 2nd, LME three month nickel contract prices closed at USD 22,290/mt, up USD 820/mt. Prices climbed unilaterally during European trading period. Positions increased slightly to 98,665. Affected by positive economic data from manufacture sectors and increased interest rate by 25 basic points to 4% from Reserve Bank of Australia, US dollar index fluctuated on downward track before closing. On March 3rd, LME nickel prices opened at USD 22,160/mt, with prices fluctuated narrowly in the morning session, and later climbed to test USD 22,345/mt. Market players were concerned over soaring LME nickel prices.

In the Shanghai nickel spot market, wait-and-see sentiment was relatively strong due to sluggish performance of LME nickel prices. Jinchuan Group raised ex-works prices by RMB 5,000/mt to RMB 163,000/mt. Market had already rumored on March 2nd that Jinchuan Group would raise ex-works nickel prices, so the announcement of prices increases on March 3rd failed to boost market transactions from downstream consumers. In addition, a portion of downstream consumers had already replenished stocks in advance in the afternoon session on March 2nd, so transactions in the Shanghai nickel spot market were sluggish on March 3rd. Supply of goods was ample in the market, with imported nickel mainly traded in the RMB 159,500-160,500/mt range and nickel from Jinchuan Group in the RMB 160,000-162,000/mt range. Transactions were mainly made among traders and a portion of investors to seek arbitrage also entered into the market.

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

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