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SMM Daily Review - 2010/4/30 Base Metals Market
May 4,2010 11:21CST
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SHANGHAI, May 4 (SMM) --


The August delivery copper contract, the most active contract on SHFE market opened at RMB 59,000/mt, and ended at RMB 58,740/mt after wild fluctuations in the session, down RMB 180/mt or 0.31% from the previous trading day.

Discounts remained in the spot copper market, with discounts between negative RMB 80-20/mt in the morning. After 10:30 am, spot discounts narrowed after copper prices on the SHFE market weakened. Of those, discounts and premiums for high-quality copper were reported in the negative RMB 30- positive 50/mt, with traded prices dropping from RMB 58,700/mt to RMB 58,400/mt, and the gap between traded prices expanded to RMB 400/mt; discounts for standard-quality copper were between negative RMB 80-0/mt, trading in the RMB 58,350-58,550/mt range; discounts for hydro-copper were between negative RMB 150-50/mt.

Over this past week, SHFE copper inventories grew by 1,534 mt to 189,441 mt, while LME copper inventories dropped by 3,250 mt to 499,300 mt, supporting copper prices to an extent.

The debt issue in Europe will not fade away soon, and copper prices will face downward pressure in the short term as a result. The US government will announce GDP data for 1Q on Friday, and is expected to boost market confidence, in stark contrast to Europe. SMM believes copper prices will rebound after sharp declines, but any upward momentum will be dampened by the ongoing debt issue. Hence, SMM expects copper prices to fluctuate at USD 7,500/mt in the short run. 


On April 30th, SHFE aluminum prices surged to RMB 16,250/mt after opening at RMB 16,265/mt, but later fluctuated lower following other metals and stock markets, with the lowest level reported at RMB 16,115/mt. SHFE aluminum prices pared some losses supported by rebounding Shanghai Composite Index, with prices finally closing at RMB 16,210/mt, up RMB 40/mt compared with the previous trading day, or up 0.25%. Positions declined significantly by 10,260 lots, and trading volumes reported less than 100,000 lots with clear signs of outflow of speculative funds before May Day holiday.

Spot market was very lukewarm since warehouses and banks were closed in advance due to the 2010 World Expo, and spot discounts also narrowed to RMB 0/mt on April 30th. Special attention should be paid to the guidance of international crude oil prices for LME aluminum prices after the May Day holiday, and SMM predicts any downward room for domestic aluminum prices will be limited, with prices expected to move narrowly at low levels in the short term.  


On Friday, downstream producers were not eager to build up stocks for production during the May Day holiday, as they had made moderate purchases several days ago, resulting in low trading sentiment. Traded prices were generally between RMB 15,600-15,700/mt, and offers for well-known branded products dropped significantly, and the price cut may be for arbitraging. In the afternoon business, most traders left for the holiday, and transactions in domestic lead markets saw no improvement, despite a positive trend on the LME lead market. 


On April 30th, SHFE zinc prices opened lower, and SHFE 1007 zinc contract prices faced strong resistance at RMB 18,500/mt, and later plunged at noon negatively affected by falling domestic A-shares market, falling to as low as RMB 18,100/mt. SHFE zinc prices moved higher in the afternoon following recovering domestic A-shares market, with prices finally ending at RMB 18,365/mt. Positions of SHFE 1007 zinc contract declined by 9,686 lots. Positions of SHFE 1008 zinc contract increased by 7,990 lots, and the turnover rate reached 344.45%, and trading volumes were more than 420,000 lots, and the turnover was more than RMB 39 billion. SHFE 1008 zinc contract prices have broken through RMB 18,500/mt, soaring to as high as RMB 18,700/mt, with prices finally ending at RMB 18,550/mt, and transactions were brisk. Although technical indicators show SHFE zinc prices were still restricted by all moving averages, SHFE zinc prices have showed signs of stabilizing after three-day declines.

In the spot markets, spot discounts narrowed to RMB 400/mt against SHFE three-month zinc contract prices given plunging SHFE zinc prices during spot trading period at noon. Trading sentiment was lackluster in the spot market on the last trading day of April, as well as the advent of three-day May Day holiday. Smelters adopted a wait-and-see attitude, and traders were also unwilling to move goods in view of weak SHFE zinc prices and the fact that banks and warehouses were closed for holidays in advance. Downstream consumers also finished purchasing goods earlier given confidence shortages with regard to post-holiday zinc prices. Whether or not zinc prices can return to RMB 18,000/mt after the holiday still needs the support from rebounding financial markets, increases in other metals prices, as well as the recovery in market confidence.


On April 29th, LME tin prices closed at USD 18,151/mt, up USD 52/mt from a day earlier, with highest price at USD 18,600/mt and lowest price at USD 18,099/mt. Daily trading volumes were 598 lots and positions were 19,686 lots. The euro rebounded to certain extend on April 29th due to eased concern over sovereign debt crisis in euro zone and the improved unemployment situation of the US, and LME tin prices also stabilized after decline.

In the Shanghai tin spot market, mainstream traded prices of brand name tin were between RMB 143,500-144,500/mt and unknown brand tin were between RMB 142,500-143,500/mt. As the May holiday is approaching, some traders were closed off on April 30th, so the overall trading sentiment was sluggish. It is expected that tin prices in the Shanghai spot market may have limited room to fall if LME tin prices begin to stabilize next week, given firm offers kept by brand name tin smelters and tin prices may meet resistance  to break through the level at RMB 146,000/mt in spot market in the short term.


On April 29th, LME nickel prices opened at USD 25,850/mt and closed at USD 25,500/mt, with highest price at USD 25,950/mt and lowest price at USD 25,250/mt. Daily trading volumes were 2,138 lots and positions were 97,533 lots. The LME nickel price stumble on last Tuesday disturbed technical tendency in the short term and the outlook of euro is still not clear, leading to unstable performance of LME nickel prices. On April 30th, LME nickel prices opened at USD 25,500/mt with prices reaching as high as USD 25,856/mt and falling as low as USD 25,400/mt by 16:30. Prices moved narrowly and advanced slightly on April 30th affected by the decline of US dollar.

In the Shanghai nickel spot market, most traders were closed for the Shanghai Expo, and there were no transactions in the market.

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

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