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SMM Daily Review - 2010/5/12 Base Metals Market
May 13,2010 10:10CST
smm insight

SHANGHAI, May 13 (SMM) --

On Wednesday, SHFE copper market opened low, and then weakened after failing to advance. The August delivery copper on the SHFE market felt pressure at RMB 56,500/mt in the morning trade, and moved lower due to falling stocks markets. In late business, SHFE August delivery copper prices found support at a low level of RMB 55,550/mt, and closed higher at RMB 55,970/mt, still failing to break out RMB 56,000/mt. Trading sentiment for SHFE August delivery copper contract was brisk, with turnover rate at 276.6%, and positions dropped slightly to 208,636 lots, and with trading value at RMB 161.5 billion. SMM expects SHFE copper market will continue to rebound slightly on Thursday.

In the spot market, traded prices fell with dropping prices on the SHFE copper market, and market supply was ample, with growing supply of both domestic and imported goods. Goods for arbitraging entered the market following copper price declines on the SHFE market, but demand remained sluggish. In the morning trade, standard-quality copper traded between RMB 56,100-56,350/mt, and deals for high-quality copper were done in the RMB 56,200~56,450/mt. Spot premiums dropped to between positive RMB 30~130/mt. In the afternoon business, spot copper prices slid to RMB 55,700~56,000/mt, with a strong wait-and-see attitude reported. Recovery in spot trading sentiment depends on stabilizing performance in both LME and SHFE copper markets, policy directions, as well as improvement in market confidence. 

SHFE aluminum prices tracked the weak trend yesterday (May 12th), and SHFE 1007 aluminum contract prices soared to RMB 15,720/mt after opening at RMB 15,645/mt, but later moved lower gradually. Although domestic stock markets rebounded slightly in the afternoon, SHFE 1007 aluminum contract prices continued to slide, with the lowest prices reported at RMB 15,580/mt, and finally closed at RMB 15,600/mt, down RMB 85/mt compared with the previous trading day, or down 0.54%. Positions declined further by 1,214 lots to 286,022 lots, and trading volumes were only 81,360 lots. SHFE aluminum prices were restricted by the 5-day moving average all day, with technical indicators showing a weaker trend.

The sluggish SHFE aluminum markets depressed transactions in the spot markets, and the wait-and-see sentiment adopted by downstream consumers was stronger. Spot discounts expanded to RMB 40/mt, and traded prices for warrants were also only zero discounts, with lukewarm transactions reported. However, aluminum prices fell at a much slower pace compared with other base metals after wild fluctuations, with prices mainly supported by costs and spot prices. Market sentiment was lackluster, with any price declines for aluminum expected to be limited.    

Trading sentiment in domestic lead markets was lackluster. Traders said only those downstream producers who made no purchases last week bought some goods in recent two days, or purchased goods on an as-needed basis for maintaining daily production needs. Market players held an unclear view towards outlook. But, lead producers showed strong interest in maintaining prices in view of costs. Transactions in the Shanghai were mainly done between RMB 15,200-15,300/mt, with deals reported at RMB 15,400/mt in Henan.

SHFE zinc prices opened low and moved lower in the morning, and later regained previous losses following rebounding domestic A-shares market, but later lacked upward momentum as LME zinc prices declined and stock markets weakened. SHFE 1008 zinc contract prices finally closed at RMB 16,795/mt, down 1.0% compared with the previous trading day, and trading volumes continued to set a new high, exceeding 1 million lots. Struggles between long and short positions intensified yesterday (May 12th), helping limit any zinc price declines or increases for the near term.

Spot transactions remained sluggish given bearish SHFE zinc market, and #0 zinc was traded between RMB 16,300-16,350/mt in Shanghai, with spot discounts ranging between RMB 310-330/mt against SHFE 1007 zinc contract prices. #1 zinc was traded around RMB 16,300/mt, and market supply of #1 zinc was limited. In addition, smelters' unwillingness to move goods helped reduce spot supply significantly in north China, keeping #0 zinc prices firm above RMB 17,000/mt recently. 

LME tin prices slipped after a high open and later received support after falling to USD 17,400/mt on May 11th, with prices finally closing at USD 17,500/mt, down USD 300/mt from a day earlier. Daily trading volumes were 322 lots and positions were 19,325 lots. Market players still doubted whether or no the EU rescue plan can help solve the Greece debt crisis effectively, and the concern over possible new monetary policy by Chinese Government aggravated, triggered by inflationary pressure from China's macro economic data. In this context, LME tin prices fell by USD 50/mt after a flat open on May 12th, and transactions continued to be bearish.

In the Shanghai tin spot market, transaction further worsened due to unfavorable factors both at home and abroad. Smelters quoted offers cautiously and haven't lowered prices for the expectation of insufficient trading supply, while traders were eager to move goods as they had limited goods without competitive prices. However, most downstream companies adopted a wait-and-see attitude and there were very few transactions in the market. Pries of major brand tin were between RMB 143,500-144,000/mt, while prices of unknown brand tin were mainly around RMB 143,000/mt.

As uncertainties of the European economic situation still exist and market still concerns over the possible weakening demand from China due to inflationary pressure, LME nickel market still deeply haunted by the sluggish market sentiment. On May 11th, LME nickel prices closed at USD 22,675/mt, down USD 275/mt from a day earlier, with highest price at USD 23,175/mt and the lowest price at USD 21,820/mt. Daily trading volumes were 3,215 lots and positions were 95,811 lots. On May 12th, LME nickel prices didn't slip along with LME copper prices after a flat open, but extended yesterday decline in the afternoon session. LME nickel prices finally ceased to fall and advanced to USD 22,700mt after US dollar index fell below 85.

In the Shanghai nickel spot market, cautious sentiment was strong among traders. As costs for imported nickel were higher than spot selling prices in domestic market, supply of imported goods was limited in the market, while costs for nickel from Jinchuan Group were also high. In this context, offers quoted by Jinchuan Group were firm between RMB 176,000-177,000/mt in the morning session, and trading volumes were moderate. However, panic selling sentient increased in the afternoon session along with a new round of price stumble. Offers quoted by Jinchuan Group were at RMB 175,500/mt, but there were few purchasers in the market and the wait-and-see sentiment reappeared in the market.

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

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