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SMM Daily Review - 2010/6/28 Base Metals Market
Jun 29,2010 10:58CST
smm insight

SHANGHAI, June 29 (SMM) --
SHFE copper market on Monday opened slightly higher, and fell back after rising to the resistance level, and was weighed down by falling China A-shares market at noon. SHFE copper for September delivery opened at RMB 54,200/mt, and retreated after reaching to RMB 54,490/mt, suggesting the price mark of RMB 54,500/mt is a short-term resistance level. In later business, SHFE September delivery copper prices moved below the daily moving average, and failed to hold on at RMB 54,000/mt at the end of trading, closing at RMB 53,960/mt, up RMB 50/mt from Friday's level, a gain of 1.05%. Positions for SHFE September delivery copper contracts were down by 17,806 lots to 144,000 lots, with trading volume increasing to 309,000 lots. Positions for SHFE October delivery copper contract increased 6,590 lots to more than 130,000 lots, and trading volumes grew to 306,000 lots, a sign of shift of trading volumes and positions. KDJ indicators continue to fluctuate at highs, but SMM believes any upward momentum will be small. In recent days, SHFE copper prices are closely linked to performance on stocks market. The Agricultural Bank of China will announce IPO on Monday evening, which will greatly affect market movements. Trading volumes on China A-shares market dropped significantly on Monday, a sign of strong wait-and-see attitude in the market.

In the spot market, premiums remained in the positive RMB 50-150/mt range, and copper prices gained at first, and then fell back. Traded prices dropped with falling China A-shares market. Transactions were made in the RMB 54,300-54,600/mt range in the morning business, and traded prices fell to RMB 54,200-54,350/mt in the afternoon. The SHFE/LME copper price ratio has fluctuated around 8.0 recently, hampering imports of imported goods, with high premiums. Supply of scrap copper is tight, and select domestic copper smelters have begun unit maintenance. Moreover, selling interest for goods from Jiangxi Copper is low in view of heavy rain in Jiangxi Province. Hence, overall market supply reduced, supporting spot premiums. As downstream producers have purchased goods when prices were below RMB 50,000/mt, they took a wait-and-see attitude when prices approach to RMB 55,000/mt. SMM believes copper prices will drop at first, and then rally after entering a new contract month, and test RMB 55,000/mt.

SHFE 1009 aluminum contract prices opened higher at RMB 14,900/mt, and later broke through the RMB 15,000/mt mark to RMB 15,040/mt, but later fluctuated lower in the afternoon negatively affected by falling stock markets. SHFE 1009 aluminum contract prices dipped to the 5-day moving average twice at the closing, with the lowest prices reported at RMB 14,885/mt, and finally prices ended at RMB 14,915/mt, up RMB 50/mt compared with the previous trading day, or up 0.34%. Trading volumes were 95,164 lots, and total positions increased by 934 lots to 249,294 lots.

The divergence between market optimism and pessimism toward aluminum price outlook intensified. Arrivals of goods in Shandong and Henan provinces declined significantly recently, while supplies of spot goods were relatively sufficient in east China. Traders kept offers firm, but downstream producers' acceptance of higher aluminum prices was limited, resulting in moderate transactions. Base metals prices have risen continuously recently, while the US dollar index showed an unclear direction. In this context, base metals prices may fall from high levels in the short term, but any price declines will be limited. Spot transactions will likely be affected by month-end settlement problems in China, which will in turn affect aluminum prices negatively, and aluminum prices are expected to remain current high levels in the short term.

Domestic lead prices on Monday were little changed from Friday's levels. Domestic lead market showed a lack of upward momentum, along with limited changes on the LME lead market since last Friday, supply surplus, and a seasonal low demand period. Spot trading sentiment was lackluster on the first trading day of the week. Transactions were done in the RMB 14,750-14,850/mt in the Shanghai market, with limited trading volumes.

SHFE 1009 zinc contract prices edged higher after opening at RMB 14,915/mt, and generally moved around RMB 15,480/mt all day, with prices finally ending at RMB 15,365/mt, up 1.5%. It is worth noting that SHFE 1010 zinc contract has become the most active contract on June 28th, with trading volumes reaching 1.75 million lots. Meanwhile, long position momentum remained strong, with new long positions of SHFE 1010 zinc contract exceeding 10,000 lots. However, spot market was sluggish on the first trading day of this week. #0 zinc was traded in the RMB 15,200-15,250/mt range in Shanghai market, while #1 zinc was traded between RMB 15,150-15,200/mt. Spot trading sentiment was bearish, and SHFE zinc prices moved higher all the way, exerting pressure on the downstream buying interest.   

LME tin prices opened at USD 18,150/mt and closed at USD 18,200/mt last Friday, up USD 100/mt from a day earlier, with the highest price at USD 18,200/mt and the lowest price at USD 18,000/mt. Daily trading volumes were 152 lots and positions were 17,653 lots. On June 28th, LME tin prices opened at USD 18,123/mt and moved without strong momentum. It still takes time to tell whether LME tin prices can stay firmly above USD 18,000/mt or not. Close attention should be paid to G20 this week and the concern cover debt crisis in the EU still lingered in the market. Market sentiment was still weak, and prices will continue to fluctuate in the short term.

In the Shanghai tin spot market, transactions continued to be lackluster on June 29th, despite that LME tin prices stood above USD 18,000/mt last Friday, with downstream consumers still bearing bearish sentiment. Traded prices of major brand tin from smelters were unchanged from the level last Friday. Traded prices of major brand tin from traders were between RMB 139,000-141,000/mt and mainstream traded prices of unknown brand tin were between RMB 138,500-138,800/mt. Although LME tin prices were relatively strong recently, domestic weak transaction curbed spot price from rising. In this context, prices are expected to remain flat this week.

LME nickel prices opened at USD 19,500/mt and closed at USD 20,022/mt last Friday, up USD 422/mt from a day earlier, with the highest price at USD 20,025/mt and the lowest price at USD 19,300/mt. Daily trading volumes were 1,381 lots and positions were 87,571 lots. On June 28th, LME nickel prices opened at USD 20,000/mt, reaching the highest level at USD 20,100/mt and touching the lowest price at USD 19,820/mt. The latest price is at USD 19,938/mt, with prices hovering around USD 20,000/mt without violent movement.

In the Shanghai nickel spot market, transactions slightly improved. Some traders entered the market to replenish stocks as prices fluctuated upward. Traded prices of imported nickel were between RMB 155,000-155,500/mt and traded prices of nickel from Jinchuan Group were between RMB 156,000-156,500/mt. Overall transactions warmed up slightly, and supply of imported nickel was relatively ample in the market.

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


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