Metals News
SMM Daily Review - 2010/3/18 Base Metals Market
smm insight
Mar 19,2010

SHANGHAI, Mar. 19 (SMM) --
SHFE June delivery copper contract opened at RMB 60,000/mt. Despite of a weaker movement before the opening of China A-shares market, the June delivery copper contract on the SHFE market rallied along with rising A-shares market. SHFE three-month delivery copper contract in the afternoon business fell as low as RMB 59,460/mt due to weakening A-shares market, with prices closing at RMB 59,550/mt, down RMB 120/mt.

Spot discounts expanded to between negative RMB 350-400/mt due to rebounding copper prices on the SHFE market. Along with strong buying interest when prices advanced, and expanded spot discounts, sales of high-quality copper at discounts of negative RMB 400/mt were smooth, narrowing spot discounts as a result. After 11:00 am, discounts for high-quality copper were around negative RMB 300/mt, and standard-quality copper reported discounts in the RMB 350-400/mt range, with deals mainly traded between RMB 58,950-59,200/mt. The improvement in market transactions during the morning business failed to persist in the afternoon. Spot discounts in the afternoon session were flat with morning levels following a falling SHFE copper market. Discounts for high-quality copper were at negative RMB 280-300/mt. Discounts for standard-quality copper were between negative RMB 350-400/mt, and with traded prices around RMB 59,000/mt.

Due to the unfavorable SHFE/LME copper price ratio in recent days, discounts for imported copper fell slightly, ranging from USD 80-120/mt, and with ample market supply. 

Yesterday, SHFE aluminum prices showed weaker performance than LME aluminum prices, and SHFE 1006 aluminum contract prices opened high at RMB 16,850/mt in the morning, since the Shanghai Composite Index fluctuated at high levels. SHFE 1006 aluminum contract prices hit the highest level of RMB 16,885/mt, but later edged down negatively affected by the weakening Shanghai Composite Index and rebounding US dollar index in the afternoon. Meanwhile, the sluggish spot market also contributed to the lackluster SHFE aluminum prices.

SHFE 1006 aluminum contract prices slipped all the way in the afternoon, hitting the lowest level of RMB 16,620/mt, with prices finally closing at RMB 16,675/mt, down RMB 100/mt compared with the previous trading day, or down 0.6%. Technically, SHFE 1006 aluminum contract prices moved around 5-day moving average line, showing no clear direction. The impact on aluminum inventories and spot transactions from downstream consumption remained limited, and the sluggish market sentiment caused spot discounts to expand further to RMB 300/mt or above. Aluminum prices will face strong pressure in the short term, and are expected to continue to fluctuate.       

Spot inquiries in domestic lead market were picked up by a stronger LME lead market, with improvement seen in market transactions. Hence, lead producers showed growing willingness to hold stocks. Deals in the Shanghai market were done between RMB 15,600-15,700/mt. Domestic lead prices were able to find support at RMB 15,500/mt following the absorption of negative news during the second half of the week. Downstream purchasing interest was stimulated by stabilizing prices.

Yesterday, SHFE zinc prices fluctuated widely, with prices opening low but moving higher in the morning. However, metals prices began falling at noon following soaring US dollar and dropping domestic A-shares markets, and SHFE three-month zinc contract prices finally closed at RMB 18,715/mt, and positions declined slightly by 458 lots. SHFE zinc prices will continue to fluctuate, with any upward momentum expected to be limited.

In the spot market, the wide fluctuations in SHFE zinc prices weighed down spot zinc prices. Yesterday, #0 zinc was traded around RMB 18,200/mt in the Shanghai market, and #1 zinc was traded around RMB 18,150/mt. Spot transactions were weak at noon following falling SHFE zinc prices. Most downstream producers stayed out of the market in anticipation of lower zinc prices below RMB 18,000/mt.   

On March 17th, LME tin prices fluctuated around high levels and closed at USD 17,750/mt, up USD 144/mt, reaching highest level at USD 17,800/mt and receiving support around 5-day moving average line at USD 17,576/mt. On March 18th, LME tin prices opened at USD 17,600/mt. Affected by the news that Greece may seek International Monetary Fund for aid, euro slipped and US dollar advanced and base metal prices all declined as a result.

In the spot market, trading sentiment was slightly better from yesterday, which was attributed to lower prices from cargo-holders given the fact that cargo-holder's confidence was faltered as LME neighboring metal prices experienced relatively weak performance. Transactions were dominated by major bran tin from Yunnan Tin group and Yunnan Gejiu Zili Metallurgy Co., Ltd with traded prices around RMB 140,000/mt. Traded prices of unknown brand tin from Nanshan Tin Solder Co., Ltd and Xianghualing Tin Industry Co., Ltd were between RMB 137,500-138,500/mt. Downstream companies mainly adopted a wait-and-see attitude, and only made purchases on an as-needed basis to keep production.  
On March 17th, LME Nickel prices opened at USD 21,950/mt and closed at USD 22,350/mt, with highest level at USD 22,370/mt and lowest level at USD 21,950/mt. Trading volumes were 1,517 lots and positions were 104,321 lots. LME nickel prices opened at USD 22,325/mt on March 18th and fluctuated narrowly, with prices testing highest level at USD 22,325/mt and testing the lowest level at USD 22,150/mt.

In the spot market, transactions were lackluster. Although Jinchuan Group raised ex-works nickel prices by RMB 2,000/mt to RMB 162,000/mt, spot prices met resistance to advance due to soft LME nickel prices. Price spread between imported nickel and nickel from Jinchuan Group narrowed, with trade price at RMB 160,000/mt and at RMB 160,500/mt respectively. Transactions were extremely lackluster in the spot market, and purchasing sentiment was relatively depressing. 
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