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

SHANGHAI, May 6 (SMM) --

Copper

LME copper prices on May 4 plunged by USD 392/mt to USD 7,013/mt at the close, down as much as 5.29%. On Wednesday, SHFE copper prices opened lower, and the August delivery copper on the SHFE market fluctuated narrowly after opening at RMB 56,500/mt. The most active copper August contract erased some losses in the afternoon trade due to rebounding A-shares market in China, finally closing at RMB 56,880/mt, down RMB 1,240/mt or 2.13% from the previous trading day. 

Sharp declines on the SHFE copper market led to spot premiums. Premiums for high-quality copper were between positive RMB 150-200/mt, dealing in the RMB 56,550-56,750/mt range; premiums for standard-quality were in the positive RMB 100-130/mt, with deals between RMB 56,500-56,650/mt; premiums for hydro-copper were at positive RMB 20-80/mt.

The SHFE/LME copper price ratio improved following marked declines on the LME copper market, resulting in increasing supply of imports. 

According to a SMM survey, operating rates at copper tube producers now are high. SMM believes copper prices will gradually stabilize after the absorption of negative finance news, and downstream producers are expected to buy products when prices are at around RMB 55,000/mt.

Aluminum

SHFE 1007 aluminum contract prices opened lower at RMB 15,845/mt negatively affected by falling LME aluminum prices, and re-tested the previous low of RMB 15,700/mt after opening, with the lowest prices reported at RMB 15,750/mt. SHFE 1007 aluminum contract prices later pared some previous losses due to profit-taking by some short positions, with prices mainly moving around RMB 15,870mt. SHFE 1007 aluminum contract prices finally closed at RMB 15,910/mt supported by rebounding Shanghai Composite Index, down RMB 165/mt compared with the previous trading day, or down 1.03%. Trading volumes were 100,040 lots, and total positions increased by 4,712 lots to 294,390 lots. 

Downstream purchasing interest improved in the spot markets, but the continuous declines in aluminum prices helped increase the wait-and-see sentiment, and traders offered prices cautiously, with slight or no discounts. Aluminum prices will continue to fall at a slower pace compared with other base metals due to high costs, as well limited increases in aluminum prices previously. SMM predicts spot aluminum prices will receive strong support at RMB 15,500/mt, and will remain at current levels under the context of no significant declines in LME aluminum prices.    

Lead

In the morning trade, some downstream producers entered the market for purchases, since domestic lead prices fell to the low-end of traded prices after recent declines, and since LME lead prices showed moderate performance by rallying USD 40/mt in the morning. Traders replenished goods as well. However, they were still wary of purchasing volumes due to drastic declines on the LME lead market overnight. Lead producers showed unwillingness to move goods to an extent, with offers heard at RMB 15,600/mt in the traditional production regions. Transactions in the Shanghai market were done between RMB 15,380-15,450/mt.

Zinc

SHFE zinc prices opened low and moved lower yesterday amid plunging LME zinc prices, and SHFE three-month zinc contract prices moved narrowly around RMB 17,650/mt, and later pared some previous losses in the afternoon when domestic A-shares market climbed to the 2,800 mark, with prices finally closing at RMB 17,740/mt, down 3.0%. In addition, both trading volumes and positions declined, and short positions were in a strong position based on the distribution of positions, both weighing down zinc prices in the short term, leaving possibility of a RMB 500/mt drop in SHFE zinc prices. 

In the spot markets, #0 zinc was traded between RMB 17,050-17,100/mt in Shanghai, with spot discounts stabilizing at RMB 400/mt against SHFE 1007 zinc contract prices, and spot transactions were relatively brisk. Spot zinc prices advanced to a range of RMB 17,100-17,150/mt in the afternoon following slightly growing SHFE zinc prices, and spot transactions were weaker as a result. Although zinc prices have fallen to a relatively low level, market players remained pessimistic toward zinc price outlook, and a limited number of downstream producers hoped to make purchases at prices below RMB 17,000/mt. In this context, SMM believes spot zinc prices may receive support between RMB 16,500-16,700/mt.

Tin

On May 4th, LME tin prices closed at USD 17,700/mt, down USD 499/mt from a day earlier, with highest price at USD 18,399/mt and lowest price at USD 17,700/mt. Daily trading volumes were 418 lots and positions were 19,279 lots. On May 5th, LME tin prices opened at USD 17,800/mt, and reached as high as USD 17,913/mt, with prices touching the lowest level at USD 17,700/mt and moving narrowly on downward track by 16:00. LME tin prices fell by 2.74% on May 4th, which is mainly weighed down by tight monetary policy in China and Greece debt crisis. The euro recorded a yearly low against the US dollar, and three major European stock markets also fell significantly. In this context, base metal prices all dropped significantly, and short position sentiment still haunted the market in the near term 

In the Shanghai tin spot market, spot prices fell slower than LME tin prices, with prices of major brand tin between RMB 143,200-144,000/mt and unknown brand tin between RMB 142,800-143,500/mt. Domestic smelters gradually lowered offers along with the stumble of LME tin price, but offers were still higher than traded prices. Traders remained cautious and dared not take the risk to replenish stocks since demand was not strong in the market, so goods held by traders were still few. As brand name tin gradually shipping out, market was dominated by unknown brand tin.

Nickel

On May 4th, LME nickel prices opened at USD 26,150/mt and closed at USD 24,400/mt, with highest price at USD 26,469/mt and lowest price at USD 24,399/mt. Daily trading volumes were 3,967 lots and positions were 96,706 lots. Dragged by weak euro performance as well as the slip of stock markets, LME nickel prices fell by USD 2050/mt, or down 7.75%, the biggest drop compared with other base metal prices. On May 5th, LME tin prices opened at USD 24,350/mt and reached as high as USD 24,625/mt, with prices touching the lowest level at USD 23,750/mt and moving narrowly on downward track by 16:00. LME nickel prices still have the possibility to linger at low levels recently, under concern over China’s tight monetary policy and the market demand as well as the concern over the uncertainty over the handling of Greece debt crisis.

In the Shanghai nickel spot market, Jinchuan Group finally lowered ex-works nickel prices by RMB 10,000/mt to USD 185,000.mt. Mainstream traded prices of nickel from Jinchuan Group were between RMB 180,000-180,500/mt and mainstream traded prices of imported nickel were at RMB 179,000/mt. Transactions were dominated by traders, and relatively few downstream consumers entered the market with strong wait-and-see sentiment.

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

 
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