SMM Daily Review - 2010/3/19 Base Metals Market

SHANGHAI, Mar. 22 (SMM) --

Copper

Affected by falling prices on the LME copper market overnight, SHFE June delivery copper contract on Friday opened lowly at RMB 59,690/mt, and later was supported by rising China A-share market from positive news at CHALCO, with prices finally closing at RMB 60,230/mt, up RMB 410/mt or 0.69% on a daily basis.

Spot discounts remained in the copper market. Discounts for high-quality copper were between negative RMB 300-350/mt, with deals generally done in the RMB 59,120-59,280/mt range. Discounts for standard-quality copper were at negative RMB 350-380/mt, and transactions were made between RMB 59,100-59,180/mt, and discounts for hydro-copper ranged from negative RMB 450 to RMB 400/mt.

After Chinese New Year holiday, spot consumption in China's market has been weak due to pressure from consumption of existing inventories, restricting copper price gains. SMM believes copper prices will continue to hover at high levels, and wait for further breakthroughs from higher demand after consuming existing stocks.

Aluminum

On March 19th, SHFE aluminum prices remained weak in the morning, and SHFE three-month aluminum contract prices fluctuated at low levels after opening at RMB 16,700/mt. Aluminum Corporation of China Limited (CHALCO) has signed a cooperation framework agreement with Rio Tinto to jointly develop the Simandou iron ore project in Guinea at noon, and CHALCO shares soared and closed at the daily trading limit as a result, which in turn drove up nonferrous stocks and pushed up the Shanghai Composite Index to test the resistance level of 3,065, and base metals prices advanced in response. SHFE three-month aluminum contract prices erased some gains after jumped at noon, with the highest level of RMB 16,950/mt, and with prices closing at RMB 16,850/mt, up RMB 80/mt compared with the previous trading day, or up 0.48%. Technically, SHFE three-month aluminum contract prices moved around 5-day moving average.

The wait-and-see sentiment still dominated the spot market, and the lower-priced imported aluminum ingot from India caused mainstream traded prices to fall. Aluminum inventories remained high, and traders held high interest in moving goods, but downstream producers stood on the sidelines in the afternoon in view of soaring aluminum prices. Any impact from short-term positive news on aluminum prices will be limited, but SMM remains optimistic toward aluminum market outlook in view of consumption expectations and the recovering SHFE/LME aluminum price ratio.

Lead

Domestic lead market was depressed. Supply of low-priced goods during the second half of the week was unavailable following market speculations over production cuts in Yunnan province due to drought conditions. However, downstream producers were not hurry to make purchases, given rising trends in the afternoon business and worries over possible changes in the monetary policy. Transactions in the Shanghai market were made in the RMB 15,600-15,650/mt range, with overall trading sentiment waning from a day earlier. 

Zinc

On March 19th, SHFE zinc prices advanced rapidly after opening low, and the SHFE three-month zinc contract prices kept moving around RMB 18,850/mt. Following the stabilizing SHFE zinc prices, #0 zinc was mainly traded between RMB 18,100-18,150/mt in Shanghai market in the morning, with limited purchases by selected downstream producers. SHFE zinc prices jumped in the afternoon driven up by domestic A-shares markets, and SHFE three-month zinc contract prices soared to RMB 19,000/mt, hitting the highest level of MB 19,035/mt, with heavy selling pressure at this level.

However, spot zinc market was weak in the afternoon, with deals only made between limited traders, and traded prices for #0 zinc were around RMB 18,250/mt. Buying interest by downstream consumers declined sharply, and SHFE 1006 zinc contract prices finally closed at RMB 18,965/mt, and positions decreased by 10,156 lots. Technical indicators show SHFE three-month zinc contract prices moved around 5-day moving average, leaving no signs of clear direction.

Tin

On March 18th, LME tin prices opened low but advanced later, with prices reaching the highest level at USD 17,799/mt. However, LME tin prices slipped slightly and closed at USD 17,725/mt, slightly down USD 25/mt, affected by the concern over negative impact on base metal market from China’s further tight credit policy. On March 19th, LME tin prices fluctuated narrowly around USD 17,750/mt

On March 19th, transactions were still sluggish in the spot market, and unknown brand tin retreated from the market completely. Upstream producers were reluctant to move goods due to high prices of raw materials and also unwilling to move goods at low prices after the low-cost goods were sold out. Traders had difficulty in purchasing goods at low prices, and lifted their offers at RMB 138,000/mt, but the transactions were not positive. Offers were mainly from Yunnan Tin group, Yunnan Chengfeng Non-ferrous Metals Co., Ltd and Yunnan Gejiu Zili Metallurgy Co.,Ltd, and transactions of standard tin from Yunnan Gejiu Zili Metallurgy Co.,Ltd and Yunnan Tin group were relatively brisk with mainstream traded prices between RMB 139,500-140,500/mt. Offers of other specifications were relatively higher, and transactions were relatively sluggish accordingly.

Nickel

On March 18th, LME nickel prices opened at USD 22,325/mt, and closed at USD 22,700/mt, with highest level at USD 22,800/mt and lowest level at USD 22,135/mt. Trading volumes were 1,696 lots and positions were 98,971 lots. On March 19th, LME nickel prices opened at USD 22,650/mt and tested the highest level at USD 22,899/mt, trying to advancing to the resistant level of USD 23,000/mt.

In the spot market, transactions slightly warmed up due to relatively strong performance of LME nickel prices. Although transactions were sluggish in the morning session, purchasing interest from traders was high when LME nickel prices advanced in the afternoon session. Supply of nickel from Jinchuan Group was ample, while supply of imported nickel was moderate. Transactions were still mainly made among arbitrators and traders, and there were still few transactions from end users. Traded prices of imported nickel were at RMB 161,000/mt, and traded prices of nickel from Jinchuan Group were between RMB 161,000-162,000/mt range.

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

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