SMM Daily Review - 2010/5/24 Base Metals Market

SHANGHAI, May 24 (SMM) --

Copper

Supported by rebounding China A-shares market, base metal market rallied with improved market sentiment. On Monday, SHFE copper market advanced further after a high open, all standing above RMB 55,000/mt, and with closing prices near at a daily session high. The most active copper, August delivery copper contract on the SHFE market opened high at RMB 55,270/mt, with a daily increase of 3.5%, or up RMB 1,870/mt. Positions for SHFE August delivery copper contract were down 17,510 lots, a sign of withdrawal of short positions. SHFE August delivery copper prices tested the 10-day moving average, with an upward momentum expected to continue on technical. Forward-term copper contracts on the SHFE market strengthened, with prices standing above RMB 55,300-55,500/mt, suggesting market player expectations of copper price rebounds in the future.
 
In the spot market, some traders were active in the morning session due to expectations of rising copper prices for the trading day. Premiums for high-quality copper were firm at positive RMB 280-330/mt. After 10:30 am, copper prices increased, but downstream producers showed low buying interest in high copper prices. Cargo-holders faced depressed sales when prices gained to above RMB 55,000/mt, and premiums experienced slight declines. Of those, premiums for standard-quality copper were at positive RMB 200/mt, while premiums for high-quality copper were between positive RMB 250-280/mt. Deals in the morning trade were generally done in the RMB 55,000-55,400/mt range, with transactions gravitating towards high-end. Copper prices on the SHFE market advanced further in the afternoon session, but a wait-and-see attitude from doubt over the sustainability of price gains depressed spot consumption. As a result, spot premiums fell to positive RMB 100-200/mt, with transactions between RMB 55,150-55,400/mt. Traded prices for high-quality copper failed to rise above RMB 55,400/mt.

Most market players take an optimistic view towards this week's copper prices, believing copper prices will rebound technically after previous sharp declines, with prices generally expected between RMB 56,000-57,000/mt.

Aluminum

SHFE 1008 aluminum contract prices dipped to the 5-day moving average of RMB 15,180/mt after opening at RMB 15,265/mt positively affected by LME aluminum prices closing with increase, but later advanced gradually supported by strongly rebounding Shanghai Composite Index, with prices later testing the daily high of RMB 15,345/mt and finally ending at RMB 15,315/mt, up RMB 250/mt compared with the previous trading day, or up 1.66%. Total trading volumes were 111,814 lots, and total positions increased by 6,112 lots to 264,492 lots.

Growth in SHFE aluminum prices was much lower than that in SHFE copper and zinc prices, and total trading volumes of SHFE zinc contracts were 1.08 million lots, and trading volumes of SHFE aluminum contracts were much lower than those of SHFE zinc contracts. SHFE aluminum prices climbed at a slower pace due mainly to continuous increases in spot aluminum stocks and the absence of speculative funds. Aluminum prices still lack clear market direction currently, and special attention should be paid to the impact on the production of aluminum producers from inspections on domestic electricity prices.

Lead

Trading sentiment in domestic lead markets was lackluster on Monday. Despite of positive performance in LME base metal market during Asian trading hours, domestic futures and equities markets, downstream producers still worried the sustainability of price rebounds, with attentions still focusing on economic news and LME lead price trends. On the first trading day of the week, spot prices in domestic lead markets were up RMB 200/mt from the previous level, generating a strong wait-and-see attitude among downstream producers. Lead smelters continued to hold prices firm, while traders also showed unwillingness to move goods in view of limited supply and optimistic outlook. Transactions in the Shanghai market were done between RMB 14,700-14,750/mt.

Zinc

SHFE 1008 zinc contract prices opened high and moved higher yesterday, with prices finally closing at RMB 16,035/mt, up 4.5%. Market was gradually stepping out of the pessimistic sentiment, and short positions of SHFE 1008 zinc contract declined significantly, but trading volumes dropped sharply by 174,000 lots to 779,000 lots, indicating more market players were worrying about whether or not zinc price increases can continue.

Traded prices for #0 zinc increased from RMB 15,500/mt to RMB 15,600/mt in Shanghai market following rising SHFE zinc prices, with spot discounts expanding from RMB 300/mt to RMB 400/mt against SHFE 1008 zinc contract prices. #1 zinc was traded between RMB 15,500-15,550/mt. In general, downstream buyers were relatively cautious about purchases under the context of soaring zinc prices early this week, and spot zinc prices rose at slower pace compared with SHFE zinc prices. In other news, traders and smelters were firm with offers, and were also uneager to move goods, resulting in relatively limited market supplies. Zinc prices are expected to rebound slightly in the short term, but it will take time for zinc prices to gain upward momentum, so SMM predicts zinc prices will fluctuate between RMB 15,500-16,500/mt.

Tin

Base metal prices all closed with gains last Friday as the US dollar weakened versus the euro and the stock market gradually stabilized. However, the upward momentum is vulnerable as the market is still hunted by the EU sovereign debt crisis and the concern over import demand of copper. LME tin prices opened at USD 17,400/mt last Friday, and closed at USD 17,600/mt, up USD 375/mt, with highest price at USD 17,850/mt and the lowest price at USD 17,300/mt. Daily trading volumes were 241 lots and positions were 17,632 lots. On May 24th, LME tin prices opened at USD 17,600/mt and fell to test USD 17,400/mt. Prices later showed upward momentum but met resistance at 20-day moving average.

In the Shanghai tin spot market, spot prices continued to slip slightly. Mainstream traded prices of tin from Yunnan Tin group were between RMB 141,000-141,500/mt and traded prices of unknown brand tin were between RMB 140,000-140,500/mt. Although LME tin prices rebounded slightly, short position sentiment was relatively strong in the market and traders avoided to take risks to replenish stocks for the concern of price decline in the future, resulting in reduced supply of goods in the market. Downstream companies continued to adopt a wait-and-see attitude and only few of them entered the market to make purchases. Currently, decline range of spot prices narrowed due to the stabilized LME tin prices, but market players still adopt a wait-and-see attitude as the EU debt crisis still weighed on commodity market. In this context, trading sentiment was still soft in tin spot market and prices of major brand tin continued to test the supporting level of RMB 140,000/mt.

Nickel

LME tin prices opened at USD 21,200/mt and closed at USD 21,390/mt last Friday, up USD 255/mt from a day earlier, with highest price at USD 21,600/mt and the lowest price at USD 20,700/mt. Daily trading volumes were 1,961 lots and positions were 91,370 lots. Base metal prices rebounded along with the decline of US dollar and the robust rebound of the US stock market. On May 24th, LME nickel prices opened at USD 21,400/mt, and later declined after a surge, still having difficulty in standing above USD 22,000/mt.

In the Shanghai nickel spot market, transactions were dominated by nickel from Jinchuan Group. Mainstream traded prices were between RMB 168,000-169,000/mt in the morning session, and later rebounded between RMB 170,000-172,000/mt after LME nickel prices surged in the afternoon session, with some traders reluctant to move goods. Transactions were mainly dominated by traders, and there were still only few downstream purchasers in the market. Overall trading sentiment was moderate.

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

 
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