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SMM Daily Review - 2010/5/13 Base Metals Market
May 14,2010 10:39CST
smm insight

SHANGHAI, May 14 (SMM) -- 

Supported by rising LME lead prices and rebounding stocks market in China, SHFE copper market rallied. In the afternoon trade, SHFE copper prices advanced all along the line, after failing to move higher in the morning business, and finally closed at a daily high level. SHFE August delivery copper opened at RMB 56,300/mt, and then fell back after a failure to test RMB 56,650/mt. In late business, the August delivery copper on the SHFE market rallied to RMB 56,820/mt, and ended at RMB 56,740/mt. Positions for SHFE August delivery copper contract were down 10,464 lots. 

In the spot market, premiums were between RMB 0-positive RMB 100/mt. Spot premiums dropped with price declines on the SHFE copper market in the morning trade. The SHFE/LME copper price ratio in the morning returned above 8.0, stimulating selling interest of suppliers, but downstream demand remained low, resulting in sluggish transactions. Prices for domestic goods were forced to drop following pressure from imported goods. Premiums for domestic standard-quality copper were down to positive RMB 30/mt, and premiums for domestic high-quality copper were around positive RMB 90/mt. Transactions were done between RMB 56,200-56,400/mt in the morning, and traded prices improved to RMB 56,350-56,600/mt in the afternoon following rising SHFE copper market. Downstream buying interest failed to improve despite of rebounding SHFE copper prices, but market supply dropped slightly in the afternoon. Downstream producers represented resistance when prices tried to break out RMB 57,000/mt, a sign of lack of trading sentiment in the spot market.

SHFE aluminum prices opened above the 5-day moving average at RMB 15,675/mt, and fluctuated lower due to sluggish spot market in the morning, with the lowest prices reported at RMB 15,640/mt. The rising LME aluminum prices and rebounding Shanghai Composite Index in the afternoon helped support SHFE aluminum prices to move higher, and SHFE aluminum prices advanced to as high as RMB 15,695/mt, with prices finally ending at RMB 15,690/mt, up RMB 50/mt compared with the previous trading day, or up 0.32%. Total positions increased by 1,294 lots to 287,316 lots, while trading volumes were only 70,916 lots.

Spot aluminum market in east China was bearish, and large amounts of goods flowing out of futures market entered spot markets, heavily weighing down spot aluminum prices, with traded prices falling all the way. The sufficient market supply also depressed downstream purchasing interest, so market sentiment was lukewarm. Technically, SHFE aluminum prices stood above the 5-day moving average yesterday (May 13th), and domestic aluminum prices will continue to follow other base metals prices trends, although both technical indicators and market fundamentals showed no improvement. Special attention should be paid to the US dollar trends, declines in LME aluminum inventories, as well as increases in positions.      

Mixed prices were reported in domestic lead markets, resulting from different selling interest among traders. Some traders maintained prices at RMB 15,300/mt, and others lowered offers to RMB 15,200/mt in view of limited rising room. A strong wait-and-see attitude dominated the market due to lack of a clear market direction, and downstream buying interest remained low at the end of this trading week. Lead producers continued to hold goods back, with limited deals traded between RMB 15,300-15,400/mt.

SHFE zinc prices mainly followed domestic A-shares market trends yesterday (May 13th), and SHFE 1008 zinc contract prices moved higher to the RMB 17,000/mt mark in the afternoon due to short-covering, and finally closed at RMB 17,105/mt. Positions increased by nearly 10,000 lots, with increases mainly short positions, an indication of a lack of optimistic sentiment with regard to zinc prices. In addition, the weak spot transactions also served as one reason behind the shortage of market optimism.

#0 zinc was mainly traded between RMB 16,350-16,400/mt in the morning in Shanghai, with spot discounts at RMB 300/mt against SHFE 1007 zinc contract prices, and with spot discounts for a portion of goods ranging between RMB 450-500/mt against SHFE 1008 zinc contract prices. #1 zinc was traded between RMB 16,300-16,350/mt. Downstream purchasing interest was lower in the afternoon in view of rising SHFE zinc prices, with limited trading volumes reported as a result. Although technical indicators show signs of recovering for zinc prices, SMM believes current zinc prices still lack actual positive news. Meanwhile, the pessimism is stronger in the market, and spot consumption was modest, so maybe it is early to say zinc prices bottom out currently. 

LME tin prices remained fluctuation trend on May 12th due to the unclear market fundamentals, with prices meeting resistance when climbed to test the 60-day moving average at USD 17,800/mt and falling to USD 17,475/mt. However, LME tin prices surged again before closing and closed at USD 17,700/mt, up USD 200/mt. Daily trading volumes were 113 lots and positions were 19,388 lots. On May 13th, LME tin prices opened USD 50/mt higher from yesterday settlement price, with prices fluctuating in a narrow price band, but transactions were not brisk.

Haunted by the uncertainties of global economic news and unclear metal price trend, supply volumes and prices of domestic spot tin haven't changed significantly, and cautious sentiment still dominated market. Upstream producers' willingness to move goods was not strong, and producers offered the same prices as yesterday. Purchasing interest from traders to replenish stocks was not strong either given the thin profit as well as the sluggish downstream consumption, and traders only kept the volumes that can meet their regular customs' demand. In this context, tin prices still remained stable under the sluggish situation, and mainstream traded prices were between RMB 143,500-144,000/mt.

LME nickel prices fluctuated widely on May 12th. Prices opened at USD 22,675/mt and climbed to test USD 23,270/mt which is just below the 60-day moving average, while prices also fell the 5-day moving average at USD 22,020/mt, and closed at USD 22,591/mt, down slightly by USD 84/mt. Daily trading volumes were 24,488 lots and positions were 96,305 lots. On May 13th, LME nickel prices fluctuated narrowly between USD 22,500-22,900/mt, and trading volumes declined.
In the Shanghai nickel spot market, transactions still haven't improved significantly, and any room for nickel prices to fall was limited due to the support price from Jinchuan Group at RMB 176,000/mt. LME nickel prices didn't fluctuate widely during the Asian trading period, hesitant and wait-and-see sentiment was still strong in the market. Downstream demand was still sluggish, so prices met resistance to climb up. Traders only had very tin profit, and they told that it was very difficult to do business at present.

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

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