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SMM Daily Review - 2010/5/25 Base Metals Market
May 26,2010 10:03CST
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SHANGHAI, May 26 (SMM) --


The August delivery copper contract on the SHFE market opened low at RMB 54,620/mt on Tuesday, and later rallied to a daily high of RMB 55,000/mt after 11:00 am. In the afternoon session, SHFE August delivery copper prices fell back due to lower stocks markets, and finally closed at a daily low level of RMB 54,140/mt, down RMB 650/mt from a day earlier. Positions for all copper contracts on the SHFE market increased by 13,796 lots, and data shows that most of newly-increased positions were long positions, a sign of a strong buy by long positions. Currently, SHFE copper prices are able to find support at RMB 54,030/mt, and SMM believes SHFE copper prices will fluctuate between 10 and 5-day moving average in the short term.

In the spot market, premiums were between positive RMB 100-250/mt. Standard-quality copper was traded in the RMB 54,850-55,050/mt, while deals for high-quality copper were done between RMB 54,950-55,150/mt. Both buyers and sellers in the morning market were cautions along with low opening on the SHFE copper market. Spot premiums dropped after SHFE copper prices advanced after 11:00 am. In the afternoon business, market confidence was depressed by falling copper prices on the SHFE market, and spot premiums weakened as well, with premiums down to RMB 0-positive 150/mt. Spot copper prices fell to RMB 54,400-54,700/mt. Spot copper prices are believed to test RMB 55,000/mt in the short term along with market uncertainties and intense struggles between short and long positions. 


SHFE aluminum prices tracked the upward trend to test the 10-day moving average after opening flat, and SHFE 1008 aluminum contract prices climbed slightly to the daily high of RMB 15,300/mt after opening at RMB 15,205/mt, with strong pressure reported at the 10-day moving average. SHFE 1008 aluminum contract prices dipped to as low as RMB 15,155/mt in the afternoon following falling LME aluminum prices, and finally closed at RMB 15,175/mt, with prices failing to break through the resistance level of 5-day moving average.

Spot aluminum prices climbed at a slower pace when SHFE aluminum prices opened low but moved higher in the morning. Market supply was sufficient, and the price increases stimulated market players’ interest in moving goods, with spot discounts expanding to RMB 50/mt. Downstream consumers adopted a cautious attitude due to concerns over the sustainability of aluminum price increases. SHFE aluminum prices plunged in the afternoon, narrowing spot discounts. Cargo-holders still kept offers firm at RMB 14,850/mt despite of almost no transactions. Aluminum prices will continue to fluctuate narrowly for the foreseeable future.  


On Tuesday, trading sentiment remained low in domestic lead markets. Fluctuating LME lead prices did little help in improving market confidence. Transactions in the Shanghai market were done between RMB 14,700-14,850/mt, with limited trading volumes. Domestic lead prices dropped to RMB 14,700/mt in the afternoon trade following declines on the LME lead market, and downstream buying interest was still low. 


Domestic A-shares market was sluggish due to market speculation that the Governor of China’s Central Bank hints China may raise interest rate, and SHFE zinc prices retreated from high levels as well. SHFE 1008 zinc contract prices hit the highest level of RMB 15,975/mt, and finally ended at RMB 15,515/mt, with prices generally losing all gains reported a day earlier. Short positions grew significantly, with the pessimism gaining.

Spot trading sentiment was bearish following sliding SHFE zinc prices. #0 zinc was mainly traded in the RMB 15,550-15,650/mt range in the morning in Shanghai market, with spot discounts moving around RMB 280/mt against SHFE 1008 zinc contract prices. Since SHFE current-month zinc contract prices were stronger than SHFE three-month zinc contract prices, spot discounts narrowed to some extent despite of modest spot transactions. #1 zinc was traded between RMB 15,500-15,600/mt. Spot trading volumes were relatively limited in the afternoon due to falling zinc prices. In addition, more downstream producers preferred to make deals around RMB 15,500/mt, with further declines in zinc prices still expected.


Base metal prices ceased to decline and rebounded on May 24th due to the better-than-expected home sales data as well as the stale euro versus the US dollar. On May 24th, LME tin prices opened at USD 17,600/mt and closed at USD 17,800/mt, up USD 200/mt from a day earlier, with highest price at USD 17,830/mt and the lowest price at USD 17,400/mt. Daily trading volumes were 129 lots and positions were 17,570 lots. On May 25th, LME tin prices opened at USD 17,401/mt and fluctuated weakly between USD 17,400-17,600/mt. The UD dollar index exceeded 87 again, and weighed down base metal prices.

In the Shanghai tin market, spot prices advanced slightly from a day earlier, with mainstream traded prices of major brand tin between RMB 142,000-143,000/mt and few supply of unknown brand tin reported in the market. Yunnan Tin group and Yunnan Chengfeng Non-ferrous Metals Co., Ltd lifted tin prices along with the advance of LME tin prices, and traded prices of tin climbed as a result. Downstream companies continue to adopt a wait-and-see attitude and made purchases on an as-needed basis, resulting in sluggish transaction in the market.


LME nickel prices opened at USD 21,400/mt and closed at USD 22,228/mt on May 24th, up USD 838/mt from a day earlier, with highest price at USD 22,300/mt and lowest price at USD 21,250/mt. Daily trading volumes were 1,845 lots and positions were 90,607 lots. On May 25th, LME nickel prices opened at USD 21,869/mt and the US dollar index surged to exceed 87, leading to sluggish performance of base metal prices, and LME nickel prices fell as low as USD 21,230/mt up to 17:00 on May 25th.

In the Shanghai nickel spot market, Jinchuan Group lifted nickel prices by RMB 2,000/mt to RMB 168,000/mt. Mainstream traded prices of spot nickel from Jinchuan Group were between RMB 170,000-171,000/mt. Transactions gradually became quiet in the afternoon session when LME nickel prices slipped. Overall trading sentiment was moderate, and transactions were still dominated by traders with few downstream purchasers reported in the market.

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

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