SMM Daily Review - 2010/5/4 Base Metals Market

SHANGHAI, May 5 (SMM) --

Copper

On Tuesday, copper prices on the SHFE market fluctuated narrowly after a low open. SHFE August delivery copper contract opened at RMB 58,110/mt, and closed at RMB 58,180/mt, down RMB 530/mt, or 0.80% from the previous trading day. Recently, SHFE copper market has experienced narrow fluctuations after opening lower for several times, a sign of low market interest in selling goods when prices fell. However, SMM believes overseas negative finance news will continue to weigh down domestic copper markets.

Falling copper prices on the SHFE market led to slight premiums in spot market. Of those, premiums for high-quality copper were between positive RMB 50-120/mt, dealing in the RMB 58,100-58,220/mt range; premiums for standard-quality copper were in the positive RMB 20-50/mt range, with deals between RMB 58,050-58,130/mt; discounts for hydro-copper were at negative RMB 50-0/mt.

According to a recent SMM survey, the number of market players with pessimistic outlook increased significantly. Most players take a pessimistic outlook for copper prices in this week given the ongoing debt issues in the Europe and China's economic controlling policy. The pessimists believe supply surplus in China and volatile finance conditions overseas will continue to depress copper prices. However, the neutralists believe recent copper price declines are due mainly to finance news, and copper prices will rebound soon once negative news is absorbed.

Aluminum

SHFE aluminum prices opened lower negatively affected by China's move to raise the deposit reserve requirement ratio by 50 basis points, and SHFE 1007 aluminum contract prices fell rapidly to test the RMB 16,000/mt mark following other base metals after opening at RMB 16,170/mt, but later stabilized at RMB 16,010/mt, and then rebounded slightly to RMB 16,080/mt due to profit-taking by some short positions, with prices finally ending at RMB 16,085/mt, down RMB 85/mt compared with the previous trading day, or down 0.53%. Trading volumes were 71,840 lots, and total positions increased by 50 lots to 289,678 lots.

Spot market failed to become bullish after the holiday, and falling SHFE aluminum prices caused spot aluminum prices to slide, with deals mainly made by slight or no discounts. The downstream consumers stayed out of the market in view of unclear aluminum price outlook, and overall trading sentiment was lukewarm. The situation of strong LME aluminum prices and weak SHFE aluminum prices appeared again after significant declines in LME aluminum prices, and domestic aluminum prices remained weak when LME aluminum prices pared previous losses gradually. However, SHFE 1007 aluminum contract prices received strong support at RMB 15,700/mt in view of high costs and the upcoming seasonal peak demand period, and SMM predicts SHFE aluminum prices will remain at low levels in the near term.    

Lead

Downstream producers generally took a wait-and-see attitude on the first trading day after the holiday, and trading sentiment remained low. Offers for general-grade lead in the Shanghai market were around RMB 15,600/mt in the morning trade, and well-known branded products were offered at above RMB 15,700/mt, flat with the previous day. In the afternoon trade, prices in domestic lead markets fell back following weak performance on the LME lead market, with prices for well-known branded goods above RMB 15,600/mt, and below RMB 15,600/mt for general-grade lead. However, transactions failed to improve as continuing price declines on the LME lead market depressed downstream buying interest. 

Zinc

SHFE zinc prices moved narrowly after opening lower, and SHFE 1008 zinc contract became the dominant contract, with prices finally ending at RMB 18,240/mt. However, trading volumes declined by nearly 10,000 lots, and positions fell as well, an indication of the wait-and-see attitude adopted by investors.

Spot market was stagnant, since downstream producers were uneager to make purchases, and some smelters were unwilling to move goods at prices below RMB 17,800/mt. Yesterday, Shanghai #0 zinc was traded around RMB 17,700/mt, with spot discounts moving between RMB 400-440/mt against SHFE 1007 zinc contract prices, while #1 zinc was traded around RMB 17,650/mt, with spot discounts moving around RMB 480/mt against SHFE 1007 zinc contract prices. LME zinc prices were USD 2,236/mt on the electronic trading at 17:00 (Beijing Time) yesterday, and LME zinc prices will likely challenge the USD 2,200/mt mark, with signs of falling. In this context, investors were very cautious recently.

Tin

LME tin prices closed at USD 18,149/mt last Friday, down USD 2/mt from a day earlier, with highest price at USD 18,450/mt and lowest price at USD 17,902/mt. Daily trading volumes were 208 lots and positions were 19,706 lots. China raised the bank reserve requirement ratio again, which added uncertainty to the market.

In the Shanghai tin spot market, transactions were extremely sluggish on May 4th as some traders were still off on holidays and only few traders quoted offers. Prices of tin from Yunnan Tin group were RMB 144,500/mt and prices of tin from Yunnan Gejiu Zili Metallurgy were RMB 143,800/mt, while prices of unknown brand tin were between RMB 143,300-143,500/mt. Downstream purchasing interest was low and inquiries were few as LME tin prices have not stabilized yet. Tin ingots scheduled to arrive at Shanghai may be negatively affected due to railway transportation limit during the Shanghai world expo. In this context, tin prices will largely remain stable this week since supply and demand was sluggish.

 Nickel

LME nickel prices opened at USD 25,500/mt and closed at USD 26,450/mt last Friday, with highest price at USD 26,469/mt and lowest price at USD 25,400/mt. Daily trading volumes were 2,138 lots and positions were 96,898 lots. On May 4th, LME nickel prices opened at USD 26,150/mt and reached as high as USD 26,450/mt, with prices touching the lowest level at USD 26,051/mt by 16:30. LME nickel prices rose by USD 950/mt last Friday, boosted by rebound of the euro and relatively positive US GDP data. However, metal prices opened with slight decline on May 4th and moved weakly at low levels after the release of tight momentary policy by China.

In the Shanghai nickel spot market, only few traders quoted offers, with nickel from Jinchuan Group between RMB 187,000-188,000/mt, and no transactions of imported nickel were reported. It is expected that LME nickel prices will test around USD 26,000/mt for several times and spot nickel prices may drop slightly since macroeconomic environment is not favorable. 

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

 
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