SMM Daily Review - 2010/5/20 Base Metals Market

SHANGHAI, May 21 (SMM) --
Copper:
Supported by rising LME copper market overnight, SHFE copper market opened high, and later lacked momentum to move higher, while any downward room was limited. The August delivery copper opened at RMB 53,560/mt, reaching as high as RMB 54,380/mt in the morning. SHFE August delivery copper dropped as low as RMB 53,430/mt in the afternoon session along with falling A-shares market in China. Later, buying activities at low levels helped SHFE August delivery copper rebound to RMB 53,980/mt, with a daily increase of 2.22%, up RMB 1,170/mt. Both trading volumes and positions dropped from a day earlier, and the turnover rate fell as well. Positions for SHFE September delivery copper grew 12,322 lots, with support available at low levels. Forward-month copper contracts all stood above RMB 54,000/mt. SMM believes the struggle between short and long positions at RMB 54,000/mt remains intense for SHFE August delivery copper prices, and market confidence towards prices at the 5-day moving average strengthened, hoping prices would test RMB 55,000/mt.

In the spot market, the SHFE/LME copper price ratio improved to around 8.1 along with narrowing declines on the SHFE copper market, and slightly rising LME copper prices, with growing supply of imported copper. Supply of domestic copper was limited following unwillingness to move goods from rebounding prices, with firm spot premiums. Imported copper still dominated market supply. Downstream producers made brisk inquiries, with improved buying interest. In the morning business, deals were made in the RMB 54,150-54,350/mt range, with offers for goods from Jiangxi Copper firm at RMB 54,300-54,450/mt on limited supply. Traded prices fell to RMB 53,750~54,000/mt in the afternoon business. Spot premiums were generally between positive RMB 200~350/mt.

Copper stocks tallied by Shanghai Futures Exchange have fallen by more than 8,000 mt for two consecutive weeks. SMM believes that copper stocks will continue to drop this week, and this will support copper prices to an extent. Tomorrow (Friday) will be the first delivery date for China's stocks index futures contracts, and particular attentions should be paid to it.

Aluminum:
SHFE 1008 aluminum contract prices opened slightly higher at RMB 15,185/mt, and later surged to RMB 15,280/mt in the morning session, with greater pressure reported at the 5-day moving average. SHFE 1008 aluminum contract prices fluctuated mildly, but later dipped to as low as RMB 15,105/mt in the afternoon negatively affected by falling LME aluminum prices and slipping Shanghai Composite Index, and finally closed at RMB 15,195/mt, up RMB 90/mt compared with the previous trading day, or up 0.6%.

Spot aluminum prices moved higher actively, and traders kept offers firm, with spot discounts ranging between RMB 30-0/mt, but downstream acceptance of higher prices was lower significantly, and most downstream consumers adopted a wait-and-see attitude given their pessimistic sentiment, resulting in lukewarm trading sentiment. The upward momentum for LME aluminum prices weakened sharply amid soaring LME aluminum inventories, but LME aluminum prices steel received strong support at USD 2,000/mt. SHFE aluminum prices will gradually test the low-end of price range in the short term, with special focus on macro economic conditions and financial market movements.      

Lead:
Although SHFE copper and zinc markets showed moderate performance in the morning session, domestic lead markets failed to make positive response, and inquiries from downstream producers fell from a day earlier. Market supply was limited, as lead producers were reluctant to move goods. Downstream producers were divided on outlook. The pessimists believed domestic lead prices would drop below RMB 13,000/mt in view of economy at risk of double-dip. Transactions in the Shanghai market were done between RMB 14,500-14,600/mt.     

Zinc:
SHFE zinc prices climbed first but moved lower later following domestic A-shares market. SHFE 1008 zinc contract prices moved narrowly around RMB 15,600/mt in the morning session, with the highest prices reported at RMB 15,720/mt, but later slid as domestic A-shares market edged down all the way, with prices finally ending at RMB 15,555/mt.

Spot transactions weakened significantly in the afternoon given falling SHFE zinc prices. #0 zinc was mainly traded between RMB 15,250-15,300/mt in Shanghai, with spot discounts moving between RMB 300-330/mt against SHFE 2008 zinc contract prices, while #1 zinc was traded in the RMB 15,200-15,250/mt range. Traded prices for #0 zinc fell to a range of RMB 15,150-15,200/mt in the afternoon, but trading volumes were relatively limited. Long positions increased sharply yesterday, but the pessimism still dominated the market, and market players remained cautious with regard to any zinc price increases in the short term, and special focus has been put on whether or not SHFE 1008 zinc contract prices can stand steady above the 5-day moving average.    

Tin:
Dragged by investors' concern over the prospect of European economy, most LME metal prices closed with losses on May 19th. LME tin prices reached the highest level at USD 17,400/mt and touched the lowest level at USD 17,075/mt, with prices closing at USD 17,200/mt, up USD 200/mt from a day earlier. Daily trading volumes were 120 lots and positions were 17,974 lots. On May 20th, LME tin prices opened at USD 17,500/mt, and lingered between 5-10 day moving averages, with prices meeting pressure to stand above USD 17,500/mt.

Shanghai tin spot market extended sluggish transactions which have been lasted for several days. Prices of brand name tin were between RMB 142,000-143,000/mt and prices of unknown brand tin were between RMB 141,000-142,000/mt. Short position sentiment was strong in the market, and few low-priced offers were reported in the market. Purchasing interest from Downstream consumers was sluggish, and buyers were waiting for prices to decline further. Traders' willingness to move goods was not high due to the fact that they had very thin profit to move goods at current price level and the fact that they had limited goods on hands.

Nickel:
Prices opened at USD 21,200/mt on May 19th and closed at USD 21,400/mt, with highest price at USD 21,650/mt and the lowest price at USD 20,781/mt. Daily trading volumes were 2,517 lots and positions were 92,463 lots. On May 20th, LME nickel prices opened at USD 21,524/mt during the Asian trading period, and fluctuated narrowly to constantly test USD 21,800/mt. The macroeconomic condition still exerted unfavorable impact on the market.

In the Shanghai nickel spot market, some suppliers took a rest and shut off business as current price level made profitless. Traded prices of nickel from Jinchuan Group were between RMB 167,500-168,000/mt and traded prices of imported nickel were between RMB 167,000-167,500/mt. Goods circulating in the market was limited, despite that the inventories were high in the market. However, wait-and-see sentiment was strong from downstream consumers. Some #200 steel mils have already begun to limit production, and some of them planned to conduct unit maintenance in advance. 

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

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