SMM Daily Review - 2010/3/25 Base Metals Market

SHANGHAI, Mar. 26 (SMM) --

Copper

Depressed by Falling LME copper market overnight, SHFE June delivery copper contract opened lowly at RMB 59,350/mt on Thursday, and showed fluctuations for the rest of trading day, with prices finally closing at RMB 59,410/mt, down RMB 180/mt or 0.3% from a day earlier. Total positions were down 11,348 lots, as volatile financial market reduced long positions.

In the spot market, discounts failed to narrow despite of falling prices on the SHFE copper market. Discounts for high-quality copper were between negative RMB 300-250/mt, dealing in a range of RMB 58,500-58,650/mt. Discounts for standard-quality copper were at negative RMB 350-300/mt, with transactions made between RMB 58,450-58,550/mt. Discounts for hydro-copper were in the negative RMB 370- 330/mt range. 

Market focus is now on the ongoing European Union Leaders Summit for signs of aid for Greece’s debt issues and the US dollar performance. Recently, negative news from financial markets has weighed down copper prices, but expectations of demand during the traditional high demand season have supported copper prices. In this context, SMM believes copper prices will continue to fluctuate in the short term, and any downward room will be limited.  

Aluminum

The US dollar again advanced to 82 during Asian trading period, and LME aluminum prices failed to climb to USD 2,200/mt, and were still short of momentum to stand firm at USD 2,200/mt in the afternoon, although the US dollar fell slightly.

SHFE aluminum prices opened low and moved lower, and the RMB 16,500/mt mark became the new resistance level for SHFE three-month aluminum contract prices. The US dollar continued to move higher to 82 in the afternoon, and SHFE aluminum prices continued to slip in response, with prices dipping to as low as RMB 16,320/mt and finally closing at RMB 16,380/mt, down 1.27%. Positions increased by 7,562 lots, and positions of SHFE 1007 aluminum contract grew gradually, with the RMB 16,500/mt mark expected to remain the pressure level in the near future. SHFE three-month aluminum contract prices closed down for four consecutive days, with low-end of price range slipping on March 25th. Technically, SHFE aluminum prices faced growing selling pressure, and the pessimism emerged in the market, with prices expected to fall in the short term.

In the spot market, CHALCO and other large smelters were unwilling to move goods after aluminum prices fell below RMB 16,000/mt, so market supply was mainly goods from futures market players on March 25th. Downstream consumers were uneager to purchase goods, so transactions failed to improve at lower prices. Spot aluminum prices stabilized at RMB 15,900/mt in the morning, but fell to a range of RMB 15,860-15,880/mt in the afternoon following falling SHFE aluminum prices. Market players predicts spot aluminum prices will test the support level of RMB 15,800/mt on March 26th.

Lead

Since domestic lead prices remained below RMB 15,500/mt on Thursday, some downstream buying interest was stimulated, with transactions mainly done in the RMB 15,250-15,300/mt range, and with few deals traded at RMB 15,350/mt for well-known branded products. Lead producers made limited sales, with deals mainly by traders.

Zinc

On March 25th, the US dollar continued to approach 82 during Asian trading period, weighing down metals prices. SHFE zinc prices opened slightly low, and SHFE 1006 zinc contract prices dipped to RMB 18,105/mt in the morning, with prices mainly fluctuating widely around moving averages. SHFE 1006 zinc contract prices faced greater pressure to climb to RMB 18,440/mt, with prices ending at RMB 18,400/mt, down 0.35%. Positions declined by 4,988 lots, and transactions were brisk, and the turnover rate of SHFE 1006 zinc contract reached 323.39%. Positions of SHFE 1007 zinc contract increased by more than 12,000 lots at the end of the month, and SHFE 1007 zinc contract prices continued to be restricted below RMB 18,500/mt. SHFE zinc prices have been restricted below all moving average lines, and are expected to fall to test the RMB 18,000/mt mark.

On March 25th, #0 zinc was traded between RMB 17,700-17,750/mt, while traded prices for #1 zinc were near RMB 17,700/mt. Downstream purchasing interest was up as SHFE zinc prices rebounded slightly. Meanwhile, a limited number of smelters were willing to move goods, since the short-term pessimism was prevailing among market players. In this context, trading activity was brisk with prices around RMB 17,750/mt, and a rare bullish trading sentiment appeared in the spot market.

Tin

On March 24th, US dollar index further advanced and exceeded the resistance level of 82, base metal prices were depressed to fall as a result. LME tin prices closed at USD 17,425/mt, down USD 85/mt, with highest level of USD 17,650/mt and lowest level of USD 17,200/mt. On March 25th, transactions were sluggish on LME tin market, and base metal prices will be depressed as strong US dollar momentum will have room to rise further recently.

In the Shanghai tin market, prices declined slightly. Mainstream prices of major brand tin were at RMB 139,000/mt and few tin from Yunnan Gejiu Zili Metallurgy Co.,Ltd was traded at RMB 139,500/mt, while prices of unknown brand tin were in the RMB 136,500-138,000/mt range. Downstream consumers were hesitant to purchase goods as LME tin pries declined to some extend this week and downstream companies believed that prices will have room to fell further. Traders were also unwilling to move goods at low prices. In this context, overall trading sentiment was still sluggish from the previous days.

Nickel

On March 24th, LME nickel prices opened at USD 22,455/mt and closed at USD 22,250/mt, with lowest level at USD 22,055/mt. Trading volumes were 1,179 lots and positions were 98,071 lots. Fitch Ratings lowered Portugal's credit rating to AA- on Wednesday, and debt crisis in Greece is only a tip of iceberg concerning the disadvantages of euro zone financial system. Momentum of US dollar index was strong and US dollar index was expected to move up further, which will weigh on base metal prices. On March 25th, LME nickel prices opened at USD 22,200/mt, with highest level at USD 22,300mt. Prices fluctuated widely during the Asian trading period, with prices experiencing weak performance in the morning session but advancing to test USD 22,290/mt in the afternoon session.

In the spot market, transactions were relatively stable. Suppliers with inventories in hand continued to move goods, some new-faced suppliers offers goods to quite a lot traders initially. Supply of goods was ample in the market, but few end-users entered the market to purchase goods. Sluggish trading sentiment in the spot nickel market will not easily change in the short term. Imported nickel was traded in the RMB 159,000-159,500/mt range, and nickel from Jinchuan Group was traded in the RMB 159,800-160,000/mt range.

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

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