Metals News
SMM Daily Review - 2010/4/2 Base Metals Market
smm insight
Apr 6,2010

SHANGHAI, Apr. 6 (SMM) --
SHFE copper prices moved higher due to the lack of clear market direction on Friday when the LME market was closed for the Easter holiday. The higher-than-expected manufacturing data in China and the US also added to the upward momentum for copper prices. The July delivery copper contract on the SHFE market opened slightly higher at RMB 62,710/mt, with prices fluctuating in the morning trade, dropping as low as RMB 62,400/mt. In the afternoon business, SHFE July delivery copper contract strengthened, with prices reaching as high as RMB 63,120/mt at the end of trading, and prices finally closed at RMB 63,100/mt, up RMB 890/mt from the previous level.

Spot discounts in the morning trade narrowed, with discounts for high-quality copper between negative RMB 450-500/mt, and for standard-quality copper at negative RMB 500-550/mt. After 10:30 am, cargo-holder reluctance in moving goods resulted in tight spot supply, making buyers unable to find available goods. As a result, spot discounts for high-quality copper narrowed to negative RMB 400/mt, dealing in a range of RMB 60,900-61,150/mt. before the end of morning business, spot discounts for high-quality narrowed to negative RMB 350/mt, and discounts for hydro-copper were between negative RMB 450/mt, with high-end traded prices close to RMB 61,200/mt. Spot discounts in the afternoon trade were flat with morning levels reported in later hours. Discounts for copper from Jiangxi Copper were at negative RMB 350/mt, and discounts for standard-quality copper were at negative RMB 470/mt, with deals mainly done in the RMB 61,150-61,400/mt range. Spot supply tightness continued into the afternoon business. Coupled with the three-day holiday for Qingming holiday, downstream producers made some stock replenishment, further tightening market supply.

As the delivery data will approach next week, cargo-holders are now unwilling to sell products at existing discounts, largely contributing for supply shortages, and SMM believes the condition will continue in the coming week. Spot discounts will disappear due to the expected supply tightness. On Friday afternoon, SHFE copper inventories continued to fall, down 1,876 mt over the past week.

On April 2nd, SHFE 1006 aluminum contract prices opened high at RMB 16,700/mt supported by soaring LME aluminum prices, but later fell rapidly after hitting the highest level at RMB 16,750/mt, an indication of strong pressure. SHFE aluminum prices rebounded slightly in the afternoon following strong performance of other base metals, with the lowest level at RMB 16,650/mt, and finally closed at RMB 16,710/mt, up RMB 30/mt, or up 0.18%. Technically, SHFE three-month aluminum contract prices moved around 5-day moving average.

Spot aluminum market improved on April 2nd after long-term sluggish movements, as downstream consumers purchased goods for stock replenishment before the Tomb-sweeping Day holiday, and as strong LME aluminum prices also allowed downstream consumers to accept current prices gradually. Total trading volumes remained low, but market sentiment has improved. 

Brisk market inquiries seen a day ago failed to improve market transactions on Friday, as downstream producers showed low acceptance to prices at above RMB 15,500/mt. Coupled with uncertainty towards outlook after Qingming Festival, downstream producers generally refused to buy products at a recent high price level. Since April is a traditionally low demand period, downstream producers believe any upward room for lead prices will be limited. However, lead producers take an optimistic outlook in view of bullish trends of other base metals, resulting in low selling interest. Deals in the Shanghai market were mainly done in the RMB 15,500-15,600/mt range.

SMM believes domestic lead prices will test RMB 15,500/mt in the coming week.

Although domestic zinc prices have been higher on April 1st, SHFE zinc prices slipped all the way after soaring to the highest level at RMB 19,680/mt on April 2nd, heavily depressing market sentiment. SHFE three-month zinc contract prices kept moving around RMB 19,400/mt, with positions down 26,600 lots. Although the Tomb-sweeping Day holiday will begin, downstream consumers were still cautious with regard to purchases at higher prices. Inquiries were up significantly after SHFE zinc prices stabilized, but actual purchases were very limited.

On April 2nd, Shanghai #0 zinc was traded around RMB 18,400/mt, with spot discounts remaining at RMB 1,000/mt against SHFE three-month zinc contract prices, while #1 zinc was traded around RMB 18,350/mt. Market views were mixed toward the performance of SHFE zinc prices on April 6th, and although technical indicators show SHFE zinc prices will be on an upward track, the pressure at 60-day moving average remains strong. Spot discounts will widen if SHFE zinc prices continue to advance. 

On April 1st, LME tin prices closed at USD 18,400/mt, down USD 50/mt, with the highest level at USD 18,750/mt and the lowest level at USD 18,350/mt. Recently, US dollar experienced weak corrections, and base metal prices will continue to receive support accordingly. On April 2nd, LME market was closed off.

In the spot market, spot prices rose slightly, with traded prices of major brand between RMB 142,000-142,500/mt, and unknown brand tin mainly from Guangxi Pinggui Feidie Co., Ltd between RMB 141,000-141,500/mt. As offers gradually advanced, wait-and-see sentiment from downstream companies was expanding, and overall trading sentiment on April 2nd was relatively sluggish as a result. Currently, prices may have difficulty in standing firm if downstream companies continue to adopt a wait-and-see attitude, even if offers are lifted up steadily next week. 

On April 1st, LME three month nickel contract prices fell after testing high levels, and closed at USD 24,950/mt, with highest price at USD 25,714/mt and lowest price at USD 24,861/mt. Daily trading volumes were 2,775 lots and positions were 103,000 lots. On April 2nd, LME market was closed off.

On the spot market, overall trading sentiment was moderate. Transactions were mainly made among traders to replenish stocks, and very few downstream consumers entered the market to make purchase. Traded prices of nickel from Jinchuan Group were in the RMB 170,500-171,000/mt range, and traded prices of imported nickel were at RMB 170,000/mt.

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