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SMM Daily Review - 2010/5/6 Base Metals Market
May 7,2010 10:27CST
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SHANGHAI, May 7 (SMM) --


On Thursday, SHFE copper market rebounded at the open, but with limited upward momentum, suffering strong pressure from short positions. In the afternoon business, plunging A-shares market and soaring short positions greatly weighed down SHFE copper market. SHFE August delivery copper contract, the most active one, rallied to RMB 57,520/mt in the morning trade, but closed at RMB 56,030/mt due to falling growth of positions. Positions for SHFE August delivery copper contract increased 33,968 lots, with turnover rate at 241.89%, and positions were close to 205,000 lots, and with trading value more than RMB 140 billion. Transactions were very brisk. Short positions dominated the market, leaving difficulties for SHFE copper prices at RMB 56,000/mt, and meanwhile near-month copper contract is stronger than forward-month contracts on the SHFE market.

In the spot market, market confidence over price rebounds in the morning trade was low in view of strong short positions, and the SHFE/LME copper price ratio rose to 8.1 following price rebounds, increasing selling interest of imported goods, but downstream buying interest failed to be stimulated. Spot premiums fell to positive RMB 30-100/mt, with no momentum to move higher. Transactions in the morning trade were done between RMB 56,700-56,850/mt, and deals in the afternoon business were down to the RMB 56,000-56,500/mt range following declines on the SHFE copper market. However, downstream producers believed copper prices would drop to RMB 55,000/mt, with copper price declines continuing. 


SHFE 1007 aluminum contract prices soared after opening at RMB 15,900/mt, with the highest prices reported at RMB 16,005/mt. However, SHFE aluminum prices fell rapidly later negatively affected by lower purchases and plunging stock markets, with the lowest prices reported at RMB 15,780/mt, and finally closed at RMB 15,800/mt, down RMB 70/mt compared with the previous trading day, or down 0.44%. Total positions declined by 2,240 lots to 292,150 lots, and trading volumes were 127,430 lots.

SHFE aluminum prices showed modest performance in the afternoon, and spot transactions were moderate in east China, since major suppliers were reluctant to move goods recently, and market supply of lower-priced goods was limited, and downstream purchasing interest was up as well. However, SHFE aluminum prices moved lower in the afternoon, and market sentiment became lukewarm in response. Market players remained pessimistic toward base metals prices given concerns over the debt crisis in Euro zone, but aluminum prices still showed strong signs of falling at a slower pace, since large amounts of goods were tied up in financing deals, helping limit market supply, and crude oil prices remained high, keeping production costs high. In this context, any downward room for LME aluminum prices to fall will be very limited, and domestic aluminum prices will also continue to fluctuate under the context of no significant fluctuations in LME aluminum prices, and SHFE aluminum prices are expected to remain weak in the short term following overall metal market trends.     


LME lead prices reversed the daily rising trend in the evening, with continued price declines reported, raising market player caution towards outlook, and trading volume fell slightly from a day early. Downstream purchasing interest still existed when prices were around RMB 15,000/mt, with brisk trading sentiment reported. Prices in the Shanghai market continued to fall due to supply pressure from goods for arbitraging, with deals mainly between RMB 15,250-15,400/mt. 


SHFE zinc prices opened higher at RMB 17,785/mt in the morning supported by technical increases in LME zinc prices, but domestic A-share market fell by over 100 points yesterday, dragging down base metals prices. SHFE zinc prices slipped all the way, with prices finally ending at RMB 17,440/mt. SHFE zinc prices hit the lowest level at RMB 17,415/mt, near the lowest level in early February. In response, market sentiment was sluggish, and spot transactions were weaker from a day earlier.

Traded prices for #0 zinc fell from a range of RMB 17,150-17,200/mt in the morning to a range of RMB 17,000-17,050/mt in the afternoon in Shanghai, with spot discounts narrowing to RMB 300/mt (when SHFE zinc prices hit the lowest level in the afternoon) from RMB 400/mt against SHFE 1007 zinc contract prices, and large and medium smelters held low interest in moving goods, but zinc prices will likely fall further. In addition, China’s zinc imports will likely increase following higher SHFE/LME zinc price ratio and lower LME zinc prices, and market supply of imported zinc has increased significantly recently, with goods mainly from Kazakhstan, Australia, and Namibia.


On May 5th, LME tin prices closed at USD 17,625/mt, down USD 75/mt from a day earlier, with highest price at USD 17,913/mt and lowest price at USD 17,250/mt. Daily trading volumes were 656 lots and positions were 19,769 lots. On May 6th, LME tin prices opened at USD 17,650/mt and extended yesterday decline, with prices touching the lowest level at USD 17,350/mt by 16:00. Many unfavorable factors weighed down base metal prices heavily, and LME tin prices may have difficulty in reversing falling trend in the short term. LME tin prices were able to remain above USD 17,600/mt when rebounded from bottom on May 5th and prices may fell to test USD 17,200/mt on May 6th if prices fail to remain USD 17,600/mt.

In the Shanghai tin spot market, prices remained flat from a day earlier, with brand name tin between RMB 143,500-144,000/mt and unknown brand name tin between RMB 142,800-143,200/mt. There were not too many goods supplying in the market. Major brand tin circulating in the market was mainly from Yunnan Tin group and Yunnan Gejiu Zili Metallurgy Co.,Ltd, while market was dominated by unknown brand tin. Overall trading sentiment was sluggish and LME tin prices continued to fall, while purchasing interest from downstream consumers was low, with a strong wait-and-see sentiment prevailing in the market.


On May 5th, LME nickel prices opened at USD 24,350/mt and closed at USD 22,365/mt, with highest price at USD 24,625/mt and lowest price at USD 20,701/mt. Daily trading volumes were 7,385 lots and positions were 97,027 lots. LME nickel prices fell by USD 2,035/mt or down 8.34%, the lowest intraday decline since January 2009. As investors concerned over spread of Greece debt crisis, stumble of stock market and the uncertainty of metal demand from China which is the largest consuming countries in the world, base metal prices all fell significantly. On April 6th, LME nickel prices opened at USD 22,015/mt and reached as high as USD 22,900/mt, with prices falling as low as USD 20,450/mt by 17:00. LME nickel prices extended yesterday decline and fell significantly after a slightly technical decline in the morning session. Close attention should be paid on whether or not nickel prices can remain above USD 21,300/mt on Thursday night.
In the Shanghai nickel spot market, market sentiment reversed, and a strong short position sentiment was prevailing in the market. Spot prices of nickel from Jinchuan Group fell sharply between RMB 174,000-175,000/mt and prices of imported nickel were between RMB 173,500-174,000/mt. Transactions were mainly done in the morning session, and traders told that they had difficulty in reaching deals in the afternoon session when LME nickel prices fell.

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

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