SHANGHAI, May 18 (SMM) --
Copper:
SHFE copper market on Monday dropped further after a low open. The most active copper contract, the August delivery on the SHFE market fell all the way after opening at RMB 55,030/mt, and finally closed at RMB 53,590/mt after hitting its daily down limit in the afternoon business, down RMB 2,830/mt. Positions were more than 198,000 lots, with trading value at RMB 104.8 billion. Positions were up 2,076 lots for SHFE August delivery copper contract, and up 2,880 lots for all copper contracts, with short positions dominating. Technically, SHFE copper prices are expected to weaken further, with levels expected to fluctuate between RMB 51,500-52,500/mt, a low level not seen since February 2010.

In the spot market, premiums were between RMB positive 50-150/mt in the morning trade. Suppliers of imported goods showed low selling interest as the SHFE/LME copper price ratio is below 8.0. With falling prices on the SHFE copper market, traded prices fell from RMB 54,200/mt to RMB 54,000/mt. Downstream producers stood on the sidelines amid bearish sentiment, with little buying interest reported. Premiums for hydro-copper rose to positive RMB 200/mt after SHFE copper prices fell to its daily limit, but traded prices slid to the RMB 53,700-53,900/mt range. No purchasing interest was heard in the afternoon business, as buyers believed prices would drop to RMB 52,000/mt. Downstream producers are not expected to buy goods until prices stabilize. Supply of domestic goods was very limited, with the exception of goods from Jiangxi Copper. Premiums for some domestic goods were reported between positive RMB 80-100/mt in the morning trade, failing to move higher despite of willingness to resist declines. Varieties and amounts of hydro-copper were higher than those of imported goods with premiums, posing difficulties in moving those goods, unless the price ratio improves.

Aluminum:
Yesterday (May 17th) was the last trading day of SHFE 1005 aluminum contract, and SHFE 1008 aluminum contract prices rebounded to as high as RMB 15,750/mt after opening lower at RMB 15,610/mt, but later moved on a downward track all day. SHFE copper and zinc prices hit their downside limit, and closed at the daily price limit, while SHFE 1008 aluminum contract prices hit the lowest level of RMB 15,060/mt, and later increased slightly before closing, with prices finally ending at RMB 15,175/mt, down RMB 660/mt compared with the trading day, or down 4.17%. Positions continued to decline by 1,356 lots to 287,702 lots, and total trading volumes dropped as well to 256,098 lots.

Spot aluminum prices declined in response to falling SHFE aluminum prices, with slight premiums reported as the delivery date nears. Metals prices declined, and market panic intensified, with the wait-and-see sentiment growing and purchasing interest dropping, and overall trading sentiment was lukewarm as a result. SHFE aluminum prices fell at a slower pace compared with other base metals, but SHFE aluminum prices will remain weak.   

Lead:
In domestic lead markets, prices were offered around RMB 15,000/mt, with prices for well-known branded goods at RMB 15,050/mt. Prices for well-known products fell to RMB 14,950/mt following further price declines, dropping below RMB 15,000/mt. Overall trading sentiment was lackluster. Downstream producers generally stood on the sidelines on the first trading day of the week in view of plunging LME lead prices. Currently, a bearish sentiment dominated the market. Lead producers showed low interest in moving goods, and traders and downstream producers were cautious as well.     

Zinc:
SHFE zinc prices opened low and moved lower yesterday (May 17th) under the context of weak LME zinc prices and a deep drop of 5.07% in domestic A-shares market, and fell to the daily price limit at 10:00 am. Spot zinc market was as sluggish as SHFE zinc market, and #0 zinc was traded around RMB 15,700/mt in Shanghai, with even lower offers appearing in the market, but downstream buying interest was lower. #0 zinc was traded around RMB 15,650/mt. Large zinc smelters were reluctant to move goods in view of plunging zinc prices. Almost no deals were made in the spot market at noon when SHFE zinc and copper prices fell to the daily price limit.

SHFE 1008 zinc contract prices finally closed at RMB 16,125/mt, with positions up nearly 9,000 lots. Long positions were growing based on the distribution of positions despite of intensifying struggles between long and short positions, indicating market pessimism is weaker and any further zinc price declines will be limited. SMM believes SHFE 1008 zinc contract prices will receive support between RMB 15,400-15,600/mt.  

Tin:
LME tin prices fell by USD 375/mt last Friday along with the decline of LME copper and nickel prices, with prices opening high at USD 17,700/mt but closing at USD 17,425/mt. Market still concerned over the risks of the EU financial system, and the implementation of the rescue plan still had obstacles just as market expected. Daily trading volumes were 143 lots and positions were 19,944 lots. On May 17th, LME tin pries surged to USD 17,799/mt after a flat open, and once reversed previous day’s losses. However, LME tin prices later fell all the way as the US dollar index surged above 87 and other base metal prices slipped along with panic sentiment.

In the Shanghai tin spot market, cargo-holders were still unwilling to cut prices in the morning session as they still pin a hope on future outlook, but their willingness to move goods increased in the afternoon session as wait-and-see sentiment expanded again and inquires were few when China's stock market hit a new year low. The slightly lowered spot tin prices failed to stimulate downstream consumption, and there were almost no transactions amid the strong short position sentiment. Prices of unknown brand tin were between RMB 142,000-142,500/mt and prices of brand name tin were between RMB 143,000-144,000/mt. It is widely believed in the market that tin prices will still have room to fall slightly.

Nickel:
Market has been haunted by the concern over the EU financial risks for a week, and short position sentiment was strong which is caused by the expectation that the Chinese Government will adopt measures to curb inflation. In this context, decline pace metal prices quickened, and LME nickel prices fell from USD 22,700/mt to USD 21,577/mt last Friday, down USD 1,213/mt. Daily trading volumes were 2,659 lots and positions were 96,160 lots. On May 17th, LME nickel prices extended decline trend during the Asian trading period and fell as low as USD 20,460/mt in the afternoon session, which is very close to the supporting level of USD 20,000/mt.

In the Shanghai nickel spot market, short position sentiment was prevailing in the market. Downstream purchases increased and trading volumes were moderate when LME nickel prices slipped in the morning session, despite that offers quoted by traders have declined all the way. Traded prices of nickel from Russia were between RMB 167,000-168,500/mt and traded prices of nickel from Jinchuan Group were between RMB 167,500-169,500/mt which have failed to stand above RMB 170,000/mt. With the stumble of domestic stock market, re-emergency of the panic sentiment and sluggish consumption, market participants largely adopted a wait-and-see attitude and LME nickel prices are expected to move around USD 20,000/mt.

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

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