SMM Daily Review - 2010/3/23 Base Metals Market

SHANGHAI, Mar. 24 (SMM) --

Copper

Supported by rising LME copper market overnight, SHFE June delivery copper contract opened higher at RMB 59,980/mt, but moved down later, with prices closing at RMB 59,560/mt, down RMB 70/mt.

Discounts remained in the spot copper market. During the major trading period, discounts for high-quality copper were between negative RMB 250- 200/mt, with deals largely traded in the RMB 59,100-59,300/mt range. Discounts for standard-copper were at negative RMB 320- 280/mt, and transactions were done between RMB 59,050-59,100/mt. Discounts for hydro-copper were in the negative RMB 380-350/mt range.

Financial factors have dominated recent copper price trends, as no significant improvement has been seen in consumption in China. Market focus is now shifting to the EU Leader Summit to be held on this Thursday and Friday, and whether or not the EU members will announce specific aid measures for Greece's debt issues remains uncertain. In addition, India's unexpected move to raise interest rates once again triggered market concerns of monetary tightening in China. In this context, SMM believes copper market will continue to see price fluctuations, and domestic copper prices will continue to meet resistance at RMB 60,000/mt in the short term. 

Aluminum

SHFE aluminum prices remained weaker than LME aluminum prices and other base metals prices, and SHFE 1006 aluminum contract prices fluctuated lower after opening low at RMB 16,740/mt, but SHFE aluminum prices tumbled in the afternoon triggered by soaring US dollar index, with prices testing the previous low of RMB 16,550/mt and finally closing at RMB 16,610/mt, down RMB 130/mt, or down 0.78%. Technically, SHFE 1006 aluminum contract prices moved around the 5-day moving average line, showing signs of weakening.

Spot market remained sluggish, and the pessimism dominated the market in view of unsteady aluminum price trends. Downstream fabricators kept inventories low, and spot inventories grew continuously, opening possibilities that spot discounts will expand further. However, the rising costs exert strong support on the low-end of aluminum price range, with any downward movements for aluminum prices expected to be limited. Aluminum prices will continue to fluctuate in the short term given a lack of clear market direction.  

Lead

On Tuesday, market inquiries and transactions improved, since downstream buying interest was stimulated after prices hit a new low since the end of Chinese New Year holiday. Some traders believed prices had dropped to the bottom level, showing intention to replenish goods, while downstream producers took a mixed view towards outlook, resulting in cautious purchasing interest. Traded prices in the Shanghai market were in the RMB 15,500-15,600/mt range.

Zinc

SHFE zinc prices opened slightly high, but later fluctuated lower. SHFE three-month zinc contract prices finally closed at RMB 18,515/mt, down RMB 75/mt, with the highest level of RMB 18,810/mt, and zinc prices continued to fluctuate. However, spot transactions were weaker compared with March 22nd. On one hand, a number of downstream consumers made purchases on March 22nd when spot zinc prices fell below RMB 18,000/mt, resulting in weakened trading sentiment yesterday. On the other hand, SHFE zinc prices plunged after soared during the short period, generating the wait-and-see sentiment in the market, and overall spot transactions became very weak as a result. Shanghai #0 zinc was traded around RMB 18,050/mt, and offers at RMB 18,000/mt were heard in the market in the afternoon, but trading volumes were limited. #1 zinc was traded around RMB 18,000/mt, with market supply limited. The pessimism is prevailing among market players triggered by falling zinc prices.

Tin

On March 22nd, LME tin prices closed at USD 17,525/mt, down USD 175/mt, with highest level at USD 17,630/mt and lowest level at USD 17,500/mt, consecutively felling below 5-day and 10-day moving averages. On March 23rd, LME tin prices experienced weak performances depressed by gains of US dollar.

In the Shanghai spot market, market prices lowered slightly compared with yesterday's level, with traded prices of major brand tin between RMB 139,000-140,000/mt and traded prices of unknown brand tin between RMB 137,500-138,000/mt. Purchasing interests from downstream consumers were not high as consumers were still waiting for prices to fall further. Traders also had low interest to move goods at low prices, and they kept offer firm above RMB 139,500/mt, with traded prices of few standard-quality tin from Yunnan Tin group between RMB 139,200-139,300/mt. Market was stagnant, and overall trading sentiment was relatively sluggish.

Nickel

On March 22nd, LME nickel prices opened at USD 22,400/mt and closed at USD 22,350/mt, with highest price at USD 22,600/mt and lowest price at USD 21,876/mt. Trading volumes were 1,705 lots and positions were 97,282 lots. On March 23rd, LME nickel prices opened at USD 22,300/mt and tested highest level at USD 22,340/mt. Affected by low nickel importing data released by China on March 22nd as well as from upward movement of US dollar, nickel prices fell to test USD 22,100/mt.

In the spot market, transactions were relatively brisk as end-users entered the market to make purchases when spot nickel prices finally fell below RMB 158,000/mt. Currently, the improved orders didn't mean that the overall industry was boosted but were caused by brisk replenishment on an as-needed basis from downstream producers since current prices level met their purchasing expectation. Around 30% trading volumes were made from end-users, and some traders replenished stocks as well. Overall trading sentiment was brisk, with traded prices of imported nickel between RMB 158,000-159,000/mt and traded prices of nickel from Jinchuan Group between RMB 159,000-160,000/mt.

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

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