SMM Daily Review - 2010/3/15 Base Metals Market

SHANGHAI, Mar. 16 (SMM) --
Copper:
On Monday, SHFE copper market fell further after a low open. SHFE June delivery copper contract opened at RMB 59,390/mt and closed at RMB 58,380/mt, down RMB 1,110/mt, or 1.87% from the previous level. LME copper market remained stronger than SHFE copper market, with the SHFE/LME copper price ratio dropping to around 7.90, reducing market supply of imported copper in recent days.

Monday was the last trading day for SHFE current-month copper contract, and spot premiums in the morning trade were heard at positive RMB 50-120/mt. Falling SHFE copper prices depressed some buying interest, with overall moderate trading sentiment reported. During the major trading period, spot premiums narrowed following slight rallies of SHFE current-month copper contract. Of those, premiums for high-quality copper were between positive RMB 50-100/mt, with deals mainly done in the RMB 58,100-58,250/mt range. Premiums for standard-quality copper were at positive RMB 20-50/mt, with transactions largely made between RMB 58,050-58,150/mt. Hydro-copper was offered at RMB 0-20/mt. Trading sentiment in the afternoon business waned following further declines of copper prices.

According to a recent SMM survey, a growing number of people take a pessimistic view towards copper outlook mainly for the following two reasons. First, market concerns over a more restrictive monetary policy in China are growing after the two legislative meetings concluded, which weighed down base metal prices. Second, higher pressure exists for consuming goods in bonded areas and inventories built up during Chinese New Year holiday. Low spot consumption in domestic post-holiday market depressed market confidence. Moreover, mixed economic data in the EU and US market will help copper prices to stay at high levels, but will not push up copper prices. However, optimists believe that market inventories are being consumed, and copper prices are at the stage of corrections. Once downstream inventories are consumed, buying interest will pick up, and copper prices will have an upward momentum by then.

Aluminum:
Yesterday, SHFE aluminum prices dipped rapidly after opening flat, and market concerns over China’s measures to tighten up monetary policy intensified. SHFE 1006 aluminum contract prices plunged by RMB 200/mt to RMB 16,750/mt after opening high at RMB 16,950/mt, and then fluctuated at this level. However, SHFE 1006 aluminum contract prices fell again by over RMB 100/mt to the lowest level at RMB 16,640/mt, with prices finally closing at RMB 16,670/mt, down RMB 225/mt compared with the previous trading day, or down 1.33%. Total positions declined by 668 lots, and total trading volumes reported 118,946 lots. Technically, SHFE 1006 aluminum contract prices moved below the 5-day moving average line.

Yesterday, the plunged SHFE aluminum market heavily depressed spot market confidence, and the wait-and-see attitude still dominated downstream consumers, resulting in sluggish transactions. Technical indicators showed the previously increased low-end prices for SHFE aluminum fell again, and relatively high aluminum inventories and uncertain macro economic news limited any upward momentum for aluminum prices, and aluminum prices will continue to fluctuate in the short term, with special focus on future recovery in consumption and market acceptance of negative macro economic news.  

Lead:
Domestic lead market was still under the shadow of higher CPI data and growing concerns over a tighter monetary policy in China, with strong pessimistic sentiment. On Monday, downstream producers generally took a wait-and-see attitude, with limited inquiries, preferring instead to wait for further declines, resulting in lackluster trading sentiment. Domestic lead producers are facing inventory pressure due to high stocks built up from Chinese New Year holiday. Transactions were made between RMB 15,600-15,650/mt in the Shanghai market.

Based on current market conditions, it will take some time to absorb negative news prevailing in the market. SMM believes downward room is still available for traded prices in spot lead market in the next two trading days.

Zinc:
Yesterday, SHFE zinc prices fluctuated lower after opening low in the morning, and stock markets dropped after opening, with the benchmark Shanghai Composite Index falling below 3,000 easily, which in turn dragged down metal futures markets. SHFE 1006 zinc contract prices tumbled by RMB 435/mt, with a decline of 2.3%.

Although SHFE zinc market has shown weak performance on Monday, spot zinc market was brisker than overall trades last week, and a number of downstream producers increased purchases when zinc prices were below RMB 18,000/mt. #0 zinc was mainly traded around RMB 17,950/mt in the Shanghai market, while #1 zinc was traded around RMB 17,900/mt. Technically, SHFE 1006 zinc contract prices moved below the 5-day moving average line, with signs of falling in the short term. However, market buying interest at lower prices was relatively high based on actual spot goods and changes of distribution of positions, so zinc prices were still moving in a band.  

Tin:
Base metal prices received support from weak performance of US dollar. LME tin prices opened flat at USD 17,450/mt on March 12th and closed at USD 17,550/mt, up USD 100/mt, with highest level at USD 17,690/mt and lowest level at USD 17,390/mt, receiving support at 10 day moving average. On March 15th, LME tin prices opened high but later declined, and were under pressure below 5-day moving average around 4:30 pm, fluctuating slightly in the USD 17,500-17,550/mt range.

LME tin price increases on Last Friday boosted tin producers’ confidence in China’s domestic tin spot market, and producers kept offers firm at RMB 142,000/mt. Transactions of major brand tin were extremely sluggish from last week, and supply of major brand tin was limited. In addition, prices of major brand tin were dragged down by lower-priced supply of unknown brand tin, and traded prices of tin from Yunnan Tin group, Yunnan Gejiu Zili Metallurgy Co., Ltd and Yunnan Chengfeng Non-ferrous Metals Co., Ltd were between RMB 140,500-141,000/mt. Transactions of unknown brand tin were slightly brisk, and downstream solder companies and chemical industry can accept prices between 138,500-139,000/mt. It is reported that although LME tin price trend is not clear yet, most market players believe that tin prices will fall slightly. Therefore, downstream consumers cautiously made purchases.

Nickel:
On March 12th, LME nickel prices opened at USD 21,350/mt and closed at USD 21,800/mt, with highest level at USD 21,800/mt and lowest level at USD 21,200/mt. Daily trading volumes were 1,768 lots and positions were 106,648 lots. On March 15th, LME nickel prices opened at USD 21,600/mt and fluctuated narrowly on downward track to test USD 21,397/mt. LME nickel price trend was not clear and short position sentiment was relatively strong.

In the Shanghai nickel market, overall trading sentiment was sluggish. Supply of goods was relatively ample. Traded prices of imported nickel were at RMB 156,500/mt and traded prices of nickel from Jinchuan Group were in the RMB 157,000-157,500/mt range. As short position sentiment was strong, there were almost no purchases in the market. Few market players stood the sideline, and market sentiment was lackluster.

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

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