SMM Daily Review - 2010/4/12 Base Metals Market

SHANGHAI, Apr. 13 (SMM) --

Copper

The LME copper market overnight climbed above USD 8,000/mt following China's robust copper imports in March, but fell back later due to falling stock market. The July delivery copper contract on the SHFE market opened at RMB 63,150/mt and closed at RMB 62,930/mt, up RMB 140 or 0.22% from a day earlier. 

Spot discounts narrowed further following nearer delivery date. Discounts for high-quality copper were between negative RMB 180-150/mt, dealing in a RMB 61,900-62,000/mt range; discounts for standard-quality were in the RMB 230-200/mt, with deals made between RMB 61,850-61,900/mt; discounts for hydro copper were at negative RMB 300-250/mt. Spot discounts for high-quality copper narrowed further to negative RMB 80-50/mt in the afternoon business as copper prices on the SHFE market dropped. SMM believes LME copper prices will likely look for further upward room from China’s strong consumption data.

However, domestic market players take mixed views over LME copper prices at USD 8,000/mt, with some neutral and pessimistic outlook reported, believing higher copper prices will depress downstream buying interest. In addition, LME and SHFE copper inventories both failed to see significant declines, and ample supply from inflow of a large amount of imported copper will exert pressure on LME copper prices at USD 8,000/mt in the short term, which will lead to price fluctuations. 

Aluminum

LME aluminum prices broke through the previous high of USD 2,395/mt, stimulating domestic aluminum prices to move higher. SHFE 1007 aluminum contract prices jumped to RMB 17,100/mt after opening at RMB 17,005/mt, but later slipped slightly due to a lack of support from other base metals. Meanwhile, the neutral spot transactions also failed to boost aluminum prices to advance further, and SHFE 1007 aluminum contract prices fell to the lowest level of RMB 16,980/mt as a result. SHFE aluminum prices climbed again in the afternoon driven up by increasing purchases, and hit the highest level of RMB 17,150/mt, with prices finally closing at RMB 17,085/mt, up RMB 225/mt compared with the previous trading day, or up 1.33%. Large amounts of speculative funds entered the market in the afternoon as SHFE aluminum prices recovered, and positions of SHFE 1007 aluminum contract increased by 34,986 lots, and total trading volumes exceeded 200,000 lots.

The optimism was gaining in the spot market, and a limited number of traders were reluctant to move goods and kept offers firm despite of large supply pressure, but overall trading sentiment was general. The strong LME aluminum prices pushed up domestic aluminum prices, but domestic aluminum prices were still under pressure to move higher since market fundamentals reported no significant improvement. SMM predicts aluminum prices will remain on an upward track, with the low-end of price range rising gradually as well.    

Lead

Trading sentiment in domestic lead market was quiet on Monday. Downstream buying interest were reported at prices around RMB 16,000/mt. Domestic lead prices have been fluctuating in the RMB 15,200-15,900/mt for more than one month since late February, but the low-end price has improved, and downstream producers are gradually receiving the rising lead price. However, whether or not domestic lead prices will breakout remains uncertain. Transactions in the Shanghai market were done in the RMB 15,800-15,900/mt range on Monday.

Zinc

SHFE zinc prices opened slightly high, but later fluctuated lower following falling domestic A-shares markets, with prices moving higher before closing. SHFE three-month zinc contract prices closed at RMB 19,530/mt, with the lowest level of RMB 19,450/mt. Long positions increased when SHFE three-month zinc contract prices slipped in the afternoon, bringing total positions of SHFE three-month zinc contract to over 210,000 lots.

Although SHFE zinc prices opened high but moved lower, the pessimism was waning in the market in view of improving spot transactions. Market players including downstream producers all believe it is inevitable SHFE zinc prices moved lower temporarily on the upward track. Yesterday, Shanghai #0 zinc was traded around RMB 18,700/mt in the morning, but spot zinc prices fell to RMB 18,600/mt in the afternoon as a result of sliding SHFE three-month zinc contract prices, with spot discounts remaining at RMB 900/mt against SHFE three-month zinc contract prices, and with deals mainly made between traders. Technically, SHFE three-month zinc contract prices moved around 5-day moving average, showing signs of fluctuating at high levels in the short term, but are expected to advance further in the future.

Tin

As US dollar index weakened, LME tin prices closed at 18,750/mt on April 9th, up 100/mt from a day earlier, with highest price at USD 18,750/mt and lowest price at USD 18,700/mt. Trading volumes were 173 lots and positions were 21,580 lots. Rising pace of LME tin prices lowered to certain extend recently, but the fallen US dollar index will continue to lend support for LME tin prices to rise further.

In the spot market, spot prices advanced from a week earlier. Tin from Yunnan Tin group and Yunnan Chengfeng Non-ferrous Metals Co., Ltd dominated market transactions with traded prices between RMB 143,000-143,500/mt, while few transactions of unknown brand tin were made between RMB 142,500-143,000/mt. On April 12th, number of end users that participated in the market increased to certain extends, and overall trading sentiment was relatively brisk on a weekly basis. Goods held by suppliers gradually reduced.

Nickel

LME nickel prices opened at USD 24,725/mt last Friday, and closed at USD 25,220/mt, with highest price at USD 25,318/mt and lowest price at USD 24,700/mt. Trading volumes were 1,728 lots and positions were 104,117 lots. The US dollar index further fell, and helped boost expectation of higher metal prices. On April 12th, LME nickel prices opened at USD 25,300/mt, and reached to USD 25,665/mt during the European trading period, up USD 445/mt. Lacking of effective resistance level, LME nickel prices shall still to have upward momentum.

In the spot market, Jinchuan Group raised ex-works prices again by RMB 3,000/mt to RMB 176,000/mt. However, transactions in the spot market were still moderate. Nickel from Jinchuan Group was mainly traded between RMB 173,500-175,000/mt, and Falconbridge's nickel was traded between RMB 172,500-173,000/mt. Supply of nickel from Russia was few in the market, and transactions were mainly done between traders.

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

 
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