SMM Daily Review - 2010/3/22 Base Metals Market

SHANGHAI, Mar. 23 (SMM) --

Copper

On Monday, SHFE June delivery copper contract opened slightly lower at RMB 59,680/mt. Despite of US dollar strength, limited price declines on the LME copper market supported SHFE copper prices. After opening, SHFE June delivery copper contract tried to rise above RMB 60,000/mt, but met strong resistance. After 10:00 am, SHFE copper market fell back, dropping as low as RMB 59,610/mt, and with prices finally closing at RMB 59,720/mt.

After 9:30 am, market offers were heard in the spot market, a sign of high selling interest among cargo-holders. Discounts for high-quality copper were at negative RMB 250/mt, and discounts for standard-quality copper were between negative RMB 300-350/mt. Spot discounts narrowed after 10:30 am when copper prices on the SHFE market weakened. Discounts for copper from Jiangxi Copper were at negative RMB 200/mt, and discounts for other high-quality copper were around negative RMB 250/mt. Discounts for standard-quality copper were at negative RMB 300/mt, and between negative RMB 330-350/mt for hydro-copper. As SHFE copper market experienced narrow price fluctuations after 10:30 am, traded prices for refined copper were in the RMB 58,900-59,100/mt range, with difficulties available in making deals at the high end. Trading sentiment in the morning business was moderate, since falling prices stimulated downstream purchasing interest. Copper prices on the SHFE market in the afternoon business dropped more, and spot discounts narrowed further to negative RMB 200/mt. Discounts for high-quality copper were between negative RMB 160-170/mt. In this context, traded prices in the afternoon business represented limited declines, ranging from RMB 58,850 to RMB 59,050/mt. In the afternoon session, cargo-holders showed slight unwillingness to move goods.

According to a recent SMM survey, most market players believed copper prices will continue to fluctuate, but still take an optimistic outlook for medium and long-term copper prices, believing an intense struggle will be at RMB 60,000/mt.

According to CFTC, long positions for fund management sector increased, and short positions on the SHFE market waned. Copper inventories in SHFE warehouses grew, but LME copper inventories continued to fall, resulting in a cautious pessimistic attitude.

Aluminum

SHFE aluminum prices opened low, but later slipped. SHFE 1006 aluminum contract prices opened at RMB 16,720/mt, but fell after soaring to RMB 16,815/mt, with prices mainly moving below moving average lines and finally closing at a low of RMB 16,680/mt. Positions of SHFE 1006 aluminum contract fell by 6,508 lots, and SHFE 1006 aluminum contract prices faced strong pressure at RMB 16,800/mt, while SHFE current-month aluminum contract prices tried to stand firm at RMB 16,350/mt, with strong pressure above the 60-day moving average line unchanged. Technical indicators show SHFE aluminum prices will continue to fluctuate narrowly in the short term.

In the spot market, spot discounts remained between RMB 200-250/mt, and traded prices fell to a range of RMB 16,140-16,180/mt following sliding SHFE aluminum prices, with supply pressure increasing. SHFE aluminum inventories reported over 394 kt last weekend, with total inventories in China already reaching 1 million mt. Traders had high interest in moving goods, and large amounts of imported aluminum flowed into domestic market, but downstream consumers only purchased on an as-needed basis, resulting in sluggish spot transactions. However, market players believe any downward movements for aluminum prices will be limited in the short term under the pressure of costs and inflation. Aluminum prices will move narrowly between RMB 16,100-16,250/mt in late March.

Lead

Domestic lead market experienced no significant gains due to unclear trends seen on the LME market from last weekend, failing to boost downstream producer confidence. As a result, downstream producers generally stood on the sidelines on the first trading day of the week. Transactions in the Shanghai market were generally made between RMB 15,550-15,600/mt. Supply in the spot market remained sufficient, despite of news of production cuts at producers in southwest China, disrupted by electricity shortages from drought conditions. 

Zinc

SHFE zinc prices fluctuated after opening low in the morning, and SHFE three-month zinc contract prices finally closed at RMB 18,555/mt, down 1.8%. SHFE three-month zinc contract prices advanced rapidly after falling to as low as RMB 18,480/mt, and positions increased significantly by 14,000 lots, with struggles between long and short positions intensifying. Most market players believe zinc prices will fluctuate this week.

In the spot market, spot zinc prices fell below RMB 18,000/mt on the first trading day of this week, and spot transactions were lukewarm last week, so spot trading sentiment improved slightly yesterday. Shanghai #0 zinc was traded in the RMB 17,950-18,000/mt range, while #1 zinc was traded around RMB 17,950/mt, with price gap between #0 zinc and #1 zinc limited. In general, downstream buying interest will increase when spot zinc prices are below RMB 18,000/mt, but any downward room below RMB 18,000/mt for zinc prices will be limited.

Tin

On March 19th, LME tin prices struggled between USD 17,650-17,800/mt, and closed at USD 17,700/mt, slightly down USD 25/mt. On March 22nd, neighboring metal prices all slipped, but LME tin long positions and short positions struggled between USD 17,550-17,690/mt. Technically, prices shall still fluctuate at high levels.

In the spot market, consumptions were not optimistic, and consumers only purchased goods in a small amount, adopting a wait-and-see attitude, although offers of major brand tin have already lowered prices. Normal standard tin offered in the market were mainly from Yunnan Tin group, and few of them were from Yunnan Gejiu Zili Metallurgy Co., Ltd, with firm offers between RMB 139,500-140,000/mt. As LME tin prices didn’t slip, cargo-holders confidence remained flat and offers of goods from Yunnan Chengfeng Non-ferrous Metals Co., Ltd and Yunnan Gejiu Zili Metallurgy Co.,Ltd were at RMB 141,000/mt. However, transactions of major brand tin were sluggish, and trading sentiment of unknown brand tin didn’t improve either. It was known that most market players believed that tin prices will remain flat this week, and upstream producers and downstream consumers both adopted a wait-and-see attitude as a result. In this context, prices will fluctuate narrowly in the future.

Nickel

On March 19th, LME nickel prices opened at USD 22,650/mt and closed at USD 22,580/mt, with highest price at USD 22,900/mt and lowest price at USD 22,321/mt. Trading volumes were 1,752 lots and positions were 98,961 lots. On March 22nd, LME nickel prices opened at USD 22,400/mt and tested highest level at USD 22,600/mt. As US dollar advanced and other metal prices slipped, nickel prices fell to test USD 22,230/mt all the way.

In the spot market, overall trading sentiment was sluggish due to weak performance of LME nickel prices. Supply of goods was sufficient in the market and cargo-holders were eager to move goods, but there were almost no transactions in the market as many market insiders stood the sideway. Traded prices of imported nickel were in the RMB 159,500-160,300/mt range and traded prices of nickel from Jinchuan Group were in the RMB 160,000-160,500/mt range.

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

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