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SMM Daily Review - 2010/6/30 Base Metals Market
Jul 1,2010 10:24CST
smm insight

SHANGHAI, July 1 (SMM) --
After hitting a 14-month low, China's A-shares market continued its downward trend on Wednesday, and plunged below 2,400 points, down as much as 2,385 points before ending at 2,398 points. Bearish sentiment both home and abroad weighed down base metal markets. SHFE copper market on Wednesday moved lower after a low open, and fluctuated narrowly at a lower level. SHFE copper market registered slight improvement in the low-end at noon when China's A-shares market rallied. In the afternoon business, SHFE copper market fluctuated above the daily moving average. SHFE copper for October delivery, the most active contract on the SHFE market opened at RMB 51,810/mt, and fell as low as RMB 51,250/mt. In the afternoon session, SHFE October delivery copper prices touched RMB 51,930/mt, but failed to hit RMB 52,000/mt. Finally, the October delivery contract on the SHFE copper market closed at RMB 51,800/mt, down RMB 1,390/mt, or down 2.61%. Positions for SHFE October delivery copper contract were up 8,618 lots to 164,000 lots, and trading volumes were 488,000 lots, with turnover rate of 297.45%. SHFE copper market closed in negative territory on Wednesday, and a downward trend remains on technical. SMM expects SHFE October delivery copper prices to test RMB 51,500/mt on Thursday.

In the spot market, copper prices tumbled more than RMB 1,600/mt, dealing in the RMB 52,250-52,500/mt range. Spot premiums were offered as high as positive RMB 150-250/mt in early trading, and later moved lower to positive 80-180/mt following slight increases on the SHFE copper market. Although the SHFE/LME copper price ratio remains low, goods for hedging entered the market, and coupled with cash generation at the end of month, cargo-holders were eager to sell goods. However, downstream producers were not active in purchases in view of cash flow at the end of month and falling price trends, leaving lackluster trading sentiment. SMM believes spot copper prices will struggle at RMB 52,000/mt.

SHFE aluminum prices opened significantly lower on June 30th negatively affected by plunging LME aluminum prices. and SHFE 1009 aluminum contract prices opened at the daily low of RMB 14,615/mt, and later regained some losses following fluctuating stock markets, with prices climbing to the daily high of RMB 14,740/mt before closing at RMB 14,690/mt, down RMB 190/mt compared with the previous trading day, or down 1.28%. Trading volumes were 94,684 lots, and positions declined by 5,460 lots to 249,332 lots. A number of short positions exited from the market, and trading sentiment turned sluggish.

Spot aluminum prices kept pace with tumbling SHFE aluminum prices, and spot premiums narrowed slightly as a result, but downstream producers still stood on the sidelines, resulting in lackluster trading sentiment on the last trading day of June. Aluminum prices will continue to follow other base metals prices trends, and SHFE aluminum prices are expected to move narrowly above RMB 14,500/mt.   

On Wednesday, SMM lowered offers by RMB 200/mt to RMB 14,600-14,800/mt. Despite of strong bearish sentiment, prices for well-known branded products were firm at RMB 14,600/mt, with few buying interest. Prices for select unknown goods were lowered to RMB 14,450/mt, but with lack of purchasing interest. Deals traded at a discount returned to the market.

SHFE zinc prices opened significantly lower, with all contracts prices moving narrowly around RMB 14,500/mt. SHFE 1010 zinc contract prices dipped to RMB 14,420/mt after opening at RMB 14,510/mt, but later advanced to RMB 14,725/mt at noon following rising China's A-shares market, and finally closed at RMB 14,610/mt, down RMB 455/mt, or down 3.02%. Positions of SHFE 1010 zinc contract increased by 31,920 lots to 268,800 lots, while trading volumes were over 1.8 million lots, with trading value reaching RMB 131.856 billion. The turnover rate was 672.88%. Trading sentiment weakened. Both long and short players adopted a cautious attitude on the last trading day of June. SHFE current-month zinc contract prices fell from RMB 14,540/mt to RMB 14,135/mt. SMM predicts SHFE zinc prices will struggle around RMB 14,500/mt in the near term, and later will test the RMB 14,150/mt support level if prices fall further.

In the spot market, #0 zinc was traded between RMB 14,450-14,500/mt in Shanghai, while #1 zinc was traded between RMB 14,400-14,450/mt. Although SHFE zinc prices bottomed out during the spot trading hours, with prices reversing some losses and moving above the daily moving average, market confidence remained sluggish. On the last trading day of June, cargo-holders moved goods actively in order to generate cash amid pessimistic market sentiment, but downstream producers had no interest in making purchases and preferred to stay out of the market under the pressure of month-end capital settlement. In this context, trading sentiment was bearish, and spot discounts expanded to RMB 150/mt against SHFE three-month zinc contract prices. SMM predicts zinc market will unlikely remain stagnant in July, with struggles between long and short positions expected to intensify.   

LME tin prices opened at USD 18,239/mt and closed at USD 17,500/mt on June 29th, down USD 680/mt from a day earlier, with highest price climbing to USD 18,240/mt and the lowest price touching USD 17,450/mt. Trading volumes were 253 lots and positions were 17,693 lots. LME base metal prices slumped sharply across the board due to weak economic data from the US, financing problems of European banks as well as concern over China's economic growth. On June 30th, LME tin prices opened at USD 17,715/mt and fluctuated weakly to test the lowest level of USD 17,450/mt. Recent macroeconomic news is not favorable for metal price movement, and LME tin prices are expected to remain weak fluctuation, still having possibility to fall further.

In the Shanghai tin spot market, domestic smelters lowered offers along with LME tin price slump, with offers of major brand tin between RMB 140,000-143,000/mt. Traders' difficulty in replenish stocks caused by smelters' reluctance to move goods at low prices, coupled with traders' low interest to make purchases due to bearish sentiment in the short term, led to limited supply of goods in the market. On June 30th, few volumes of major brand tin were traded between RMB 139,500-140,000/mt, and unknown brand tin were mainly traded around RMB 138,000/mt.

LME nickel prices opened at USD 20,300/mt and closed at USD 19,210/mt on June 29th, down USD 1,207/mt from a day earlier, with the highest price at USD 20,350/mt and the lowest price at USD 19,050/mt. Daily trading volumes were 2,452 lots and positions were 87,507 lots. On June 30th, LME nickel prices opened at USD 19,210/mt, with highest price at USD 19,390/mt and the lowest price at USD 19,080/mt, up USD 85/mt. The US dollar slipped slightly and LME nickel prices continued to fluctuate.

In the Shanghai nickel spot market, enquiries were relatively brisk, with traded prices of nickel from Jinchuan Group between RMB 152,500-153,000/mt and traded prices of imported nickel between RMB 151,500-152,000/mt in the morning trading session. Banks were closed off for a bi-annual account, leading to inadequate liquidity in the market. Transactions between traders were relatively sluggish, but enquires from downstream consumers were brisk. Some buyers entered into the market, with relatively ample supply of imported nickel reported in the market.

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


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