SMM Daily Review - 2010/3/4 Base Metals Market

BEIJING, Mar.5 (SMM) --

Copper

On Thursday, copper futures contract for June delivery opened slightly higher at RMB 59,870/mt, moving in the RMB 60,200-60,300/mt range. After 11: 00 am, SHFE June delivery copper contract prices tracked downward due to falling stocks market, with prices closing at RMB 59,410/mt, and prices reached as low as RMB 59,400/mt for the day.

Spot discounts narrowed significantly along with stabilized copper prices, and improved consumption. Discounts for goods from Jiangxi Copper were at negative RMB 250-270/mt, and discounts for standard-quality copper at negative RMB 350-370/mt. Falling copper prices on the SHFE market after 11: 00 am further narrowed spot discounts. Discounts for goods from Jiangxi Copper were at negative RMB 200/mt, and standard-quality copper were offered discounts at negative RMB 300/mt, with deals done in the RMB 58,950-59,150/mt range. Traded prices for high-quality copper were between RMB 59,050-59,250/mt range.  Market supply was dominated by high-quality domestic copper, and supply of imports was limited due to the unfavorable SHFE/LME copper price ratio in recent days.

Transactions picked up greatly from previous levels due to improved demand, as inventories made by downstream producers before the holiday were almost fully consumed. In the afternoon business when futures copper prices weakened further, high-quality copper reported discounts at negative RMB 200/mt, and discounts for standard-quality copper were around negative RMB 300/mt. Traded prices fell back to the range of RMB 58,500-58,950/mt following lower futures copper prices. Trading sentiment in the afternoon business was lower compared with morning levels, resulting in declines in trading volumes.

Aluminum

Yesterday, SHFE 1006 aluminum contract prices opened high at RMB 16,930/mt, with the highest level of RMB 16,945/mt, but faced relatively strong resistance at 60-day moving average. SHFE aluminum prices fluctuated slightly in the morning, and later slipped negatively affected by the plunging Shanghai Composite Index at noon, and later regained some lost ground after hitting the lowest level of RMB 16,770/mt, with prices finally closing at RMB 16,820/mt, down RMB 25/mt compared with the previous trading day, or down 0.15%. Technically, SHFE three-month aluminum contract prices moved around 5-day moving average, showing signs of fluctuating.

Spot aluminum market improved compared with last week, but the aluminum price fluctuations caused downstream fabricators to take a wait-and-see attitude toward purchases, and spot discounts remained at RMB 200/mt, with trading sentiment lackluster.

Lead

On Thursday, traded prices in domestic lead market improved from a day earlier following strong LME lead prices in earlier previous time. However, traded prices fell back after LME lead prices dropped. Output at lead producers in Yunnan province dropped due to restriction of electricity supply, showing unwillingness to move goods at prices below RMB 16,000/mt. Supply of goods from Yunnan province recently was limited, and prices were higher than levels seen at the end of 2009.

Although LME lead prices stabilized at USD 2,200/mt recently, domestic lead prices remained on a downward track, creating a wait-and-see attitude among downstream producers, who mainly purchased goods on an as-needed basis. Therefore, trading volume over the past several days were small, yet stable, with traded prices between RMB 15,650-15,850/mt range. 

Zinc

SHFE zinc prices moved higher in the morning, but later fluctuated lower following domestic A-shares market trends. SHFE 1006 zinc contract prices opened at RMB 18,415/mt, and closed at RMB 18,350/mt, up RMB 125/mt, with the highest level of RMB 18,590/mt.

Spot zinc market showed sluggish performance yesterday given falling SHFE zinc prices. Spot discounts for #0 zinc were RMB 550/mt against SHFE 1006 zinc contract in the Shanghai market, with mainstream traded prices falling from RMB 17,900/mt to RMB 17,800/mt, while traded prices for #1 zinc were in the RMB 17,750-17,800/mt range. In the afternoon, spot zinc prices fell further to the range of RMB 17,700-17,750/mt, but trading volumes were very limited. On one hand, spot trading sentiment was brisk yesterday, and a number of downstream producers purchased raw materials. On the other hand, falling SHFE zinc prices depressed purchasing interest. However, current market supply was sufficient, and smelter reluctance to move goods declined slightly, with lower-priced goods relatively ample compared with previous level. The market pessimistic sentiment emerged amid current weak performance of zinc prices.

Tin

On March 3rd, LME tin prices continued climbing to test resistance level of USD 17,300/mt, and declined to certain extent after reaching USD 17,500/mt, with prices finally closing at USD 17,345/mt, up USD 295/mt. On March 4th, LME tin prices opened with significant gains, and later tested USD 17,300/mt and received support at there. Buying increased, and prices continued to test new high at USD 17,700/mt. Technically, LME tin prices will no longer fluctuate at previous range any more in the near term.

In the Shanghai tin spot market, offers from upstream producers were near RMB 142,000/mt, and producers were not eager to move goods, which is mainly attributed to concerns that tight supply of water and electricity from deteriorating drought in Yunnan, Guizhou and Sichuan provinces might exert negative impact on tin production. However, market transactions still remained cautiously, with sluggish trading sentiment in general. Traded prices were still in the RMB 140,800-141,500/mt range, and domestic tin prices will continue to fluctuate on upward track along with LME tin prices. 

Nickel

On March 3rd, LME nickel prices closed at USD 22,650/mt, up USD 360/mt. The expansion speed from the US manufacture sectors in February was better than expectation. LME nickel inventories declined slightly by 744mt to 162,096 mt. Surcharges of stainless steel alloy prices increased in European regions, stimulating higher inventory levels of stainless steels and also boosting orders and operating rates from steel mills, resulting in strong performance of nickel prices. On March 4th, LME nickel prices opened at USD 22,600/mt, and prices fluctuated down to test USD 22,400/mt in the morning session. Although LME nickel prices constantly tested USD 22,800/mt, compelled by buying, market players still concerned over high price risks. 

In the Shanghai nickel market, transactions of nickel were brisk in general. Jinchuan Group re-raised ex-works nickel prices by RMB 3,000/mt to RMB 166,000/mt, but traded prices were still lower than offers. On March 4th, transactions were mainly made among traders, and supply of goods were sufficient, with traded prices of imported nickel in the RMB 161,000-162,000/mt range, and nickel from Jinchuan Group at RMB 162,000/mt. Transactions were mainly conducted to gain arbitrage, and end users made purchases on an as-needed basis. Operating rates at large stainless steel mills were still above 70%. As inventory levels were high at stainless steel mills, stainless steel prices didn’t climb drastically along with nickel prices, and profit at stainless steel mills reduced greatly when prices of raw materials climbed steadily after the Chinese New Year holiday. In the context, stainless steel mills were cautiously to make purchase.

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

 
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