SMM Daily Review - 2010/6/24 Base Metals Market

SHANGHAI, June 25 (SMM) –

Copper
On Thursday, SHFE copper market opened slightly higher before failing to hit the 30-day moving average, and finally closed with narrower daily gains. SHFE copper for September delivery climbed to RMB 53,900/mt from a daily low of RMB 53,130/mt, and fluctuated above the daily moving average for most of the day. In afternoon business, SHFE September delivery copper prices came under pressure from dropping China’s A-shares market, and finally closed at RMB 53,520/mt, up RMB 570/mt or 1.08%. Trading volumes were 449,000 lots, with turnover rate of 258.65%. Positions for SHFE September delivery copper contract were down 5,094 lots, a sign of position reductions by shorts. Positions for SHFE October delivery copper contract increased significantly by 13,544 lots, an indication of position building by longs. SHFE copper prices are fluctuating in the 20 and 30-day moving average, with price briefly rising above the 30-day moving average, and the low-end at RMB 52,500/mt stabilize.

In the spot market, transactions were largely made in the RMB 53,800~54,050/mt range. Spot premiums in the morning trade were between positive RMB 80-150/mt, and rallied slightly to positive RMB 100-200/mt in the afternoon business, with traded prices stabilizing around RMB 54,000/mt. Prices for high-quality domestic goods, with “Guixi” brand copper as a representative were firm, as market worried goods supply in view of hampered transportation from heavy rain in Jiangxi province. Sales of imported goods were limited due to climbing premiums in recent days. The SHFE/LME copper price ratio advanced to above 8.05 on Thursday, and supply of imported goods increased slightly in response. Downstream producers were eager to make purchases at lower prices, and became reluctant in buying goods when prices rose above RMB 54,000/mt. SMM believes next target for spot copper prices will be RMB 55,000/mt, but trading sentiment will be negatively affected when prices approach to the target. 

Aluminum
SHFE aluminum prices continued to edge higher yesterday, and SHFE 1009 aluminum contract prices advanced after opening slightly high at RMB 14,840/mt, with prices mainly swinging around RMB 14,900/mt all day. SHFE 1009 aluminum contract prices hit the daily high of RMB 14,975/mt and dipped to the daily low of RMB 14,815/mt, and finally closed at RMB 14,885/mt, up RMB 95/mt compared with the previous trading day, or up 0.64%. Total trading volumes reported 118,206 lots, and total positions declined by 450 lots to 250,578 lots. SHFE 1009 aluminum contract prices stabilized at the 5-day moving average gradually, with prices mainly moving around the 20-day moving average.
 
Inquiries were up in the spot market, and rising SHFE aluminum prices in the morning session allowed traders to raise offers consecutively, with overall trading sentiment relatively bullish. Aluminum market fundamentals reported no substantial changes, and aluminum producers delayed their production cut plans in view of rebounding aluminum prices. Meanwhile, the seasonal low demand period nears, and aluminum prices will likely fall further in the medium and long term. However, the further development of China’s currency move and changes in financial markets will have stronger impact on aluminum prices.         
 
Lead
Domestic lead prices continued to rise, but any upward momentum was soft as prices were closer to RMB 15,000/mt. Transactions in the Shanghai market were done between RMB 14,800-14,900/mt. Downstream producers were not eager to make purchases due to constant price gains. Currently, market view towards outlook is mixed. Particular attentions should be paid to whether or not domestic lead prices are able to rise above RMB 15,000/mt.

Zinc
SHFE 1009 zinc contract prices moved higher strongly after opening slightly high at RMB 15,170/mt, and then climbed to RMB 15,460/mt rapidly, but as further increases in zinc prices lacked speculative funds after large amounts of long positions withdrawn from the market at higher prices, SHFE 1009 zinc contract prices mainly moved around RMB 15,335/mt all day, with stronger pressure reported at RMB 15,400/mt. SHFE 1009 zinc contract prices finally ended at RMB 15,345/mt, and positions declined by 36,540 lots to 238,190 lots. A portion of long positions left the market after profit-taking, and short position momentum was gaining based on the distribution of long and short positions.
 
Trading volumes of SHFE 1009 zinc contract were less than 2.78 million lots recorded on June 23rd, but were still at a relatively high of 1.82 million lots, indicating the wait-and-see sentiment was emerging. Market players opted for a cautious attitude since recent zinc prices increases mainly relied on speculative funds with the absence of improving market fundamentals and positive economic news. Speculation is still strong based on current trading volumes, positions, and zinc prices, and SMM predicts SHFE 1009 zinc contract prices will still face selling pressure between RMB 15,500-16,000/mt.
 
In the spot market, #0 zinc was traded between RMB 15,100-15,150/mt in the Shanghai market, with spot discounts moving around RMB 250/mt against SHFE 1009 zinc contract prices, while #1 zinc was traded around RMB 15,100/mt. Downstream buying interest remained low, but spot transactions improved from a day earlier. A number of downstream consumers began to make purchases in south China and east China, but trading volumes were limited. Market players generally stood on the sidelines recently amid significant changes in zinc prices. 

Tin
LME tin prices opened at USD 18,050/mt on June 23rd and closed at USD 17,889/mt, down USD 161/mt from a day earlier, with highest price climbing to USD 18,200/mt and the lowest price touching USD 17,800/mt. Daily trading volumes were 204 lots and positions were 17,592 lots. LME base metal prices mostly closed with losses on Wednesday as the US new home sales hit a record low and the Euro weakened. On June 24th, LME tin prices opened at USD 17,889/mt, with prices falling after testing high at USD 18,150/mt. It is still hard to tell whether or not prices can stand above USD 18,000/mt.
 
In the Shanghai tin spot market, affected by the surge of LME tin price at USD 18,100/mt in the morning session and higher offers from smelters, mainstream traded prices of tin from Yunnan Tin group were between RMB 140,000-140,500/mt and prices of other major brand tin were between RMB 139,500-140,000/mt, while price of unknown brand tin were between RMB 138,800-139,000/mt. Overall trading sentiment was moderate, but downstream price acceptance towards prices above RMB 140,000/mt was low. Transactions of major brand tin with prices between RMB 138,800-139,500/mt were relatively brisk. Few suppliers offered tin from Yunnan Tin group at RMB 139,800/mt, but volumes of such low-priced tin from Yunnan Tin group were low, failing to affect mainstream prices in the market. 
 
Nickel 
LME nickel prices opened at USD 19,649/mt and closed at USD 19,280/mt on June 23rd, down USD 509/mt from a day earlier, with the highest price at USD 19,830/mt and the lowest price at USD 19,131/mt. Daily trading volumes were 1,332 lots and positions were 87,870 lots. On June 24th, LME nickel prices opened at USD 19,344/mt, with highest price at USD 19,650/mt and the lowest price at USD 19,340/mt. LME nickel prices still fluctuated weakly in narrow range.
 
In the Shanghai nickel spot market, pries remained stable, and transactions were moderate. Traded prices of nickel from Jinchuan Group were between RMB 155,000-155,500/mt and traded prices of imported nickel were between RMB 153,500-154,000/mt. Costs of trading goods were basically around RMB 154,000/mt. Although prices were relatively stable, downstream purchasers still remained cautiously, with moderate trading sentiment reported in the market. 
 
To contact the writer on this report: angelawang@smm.cn

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