SMM Daily Review - 2010/7/1 Base Metals Market

SHANGHAI, July 2 (SMM) --
Copper:
SHFE copper market retreated further on Thursday after a low open. SHFE copper prices rebounded briefly in the morning session, but sled below RMB 51,500/mt due to a new low on stocks market, and the next support level will be likely at RMB 50,000/mt. SHFE copper for October delivery opened at RMB 51,390/mt, and fell back after touching RMB 51,950/mt. In the afternoon session, SHFE October delivery copper prices slid due to falling stock markets, and finally closed at a daily low level of RMB 51,040/mt. Positions for SHFE October delivery copper contracts were up 35,296 lots, with total positions closer to 200,000 lots, and daily trading volumes were 589,000 lots, with turnover rate at 295.62%, a sign of withdrawal by longs, and position increases by shorts. The October delivery copper prices on the SHFE market have well below the moving average, and a bearish sentiment has enveloped the market.

In the spot market, supply of imported copper reduced sharply due to the continuing unfavorable price ratio, leaving premiums firm. Cargo-holders of domestic goods were also unwilling to move goods, with higher premiums. Although traded prices in the afternoon business fell to RMB 52,000-52,250/mt from morning levels of RMB 52,300-52,450/mt, spot premiums rallied from positive RMB 150-250/mt in the morning to positive RMB 200-350/mt in the afternoon. SMM believes spot market supply will support copper prices to an extent, which will help limit downward room for copper prices. On Friday, SMM believes spot copper prices will try to hold at RMB 51,500/mt, and bargain hunting will appear. 

Aluminum:
SHFE aluminum prices were weaker all day. SHFE 1009 aluminum contract prices soared to RMB 14,725/mt after opening at RMB 14,615/mt in the morning session, and then fluctuated below all daily moving averages amid stronger pressure. The Shanghai Composite Index fell below 2,400 points in the afternoon and later fluctuated lower, allowing SHFE 1009 aluminum contract prices to hit the daily low of RMB 14,580/mt, and finally prices ended at RMB 14,605/mt, down RMB 65/mt compared with the previous trading day, or down 0.44%. Total positions increased by 3,556 lots to 252,888 lots, while trading volumes shrank to 75,228 lots.

In the spot market, supplies of aluminum ingot from non-CHALCO aluminum producers were tight due to significant declines in recent arrivals of goods, but traders remained cautious about market outlook, with spot discounts expanding slightly. Inquiries were up from downstream fabricators, and trading sentient was moderate. On July 1st, CHALCO cut spot alumina prices by RMB 200/mt to RMB 2,650/mt. Non-CHALCO alumina producers generally made deals at RMB 2,400/mt, leaving wide gap between actual traded prices and offers quoted by CHALCO, so CHALCO price adjustment almost had no impact on aluminum market. Aluminum prices show no clear direction currently based on market fundamentals, and SMM predicts SHFE 1009 aluminum contract prices will continue to move narrowly above RMB 14,500/mt.      

Lead:
On Friday, domestic lead prices rallied in early trading due to rebounding China's A-shares market, helping increase market offers, with more inquiries, and offers for well-known branded goods were quoted at RMB 14,600/mt. However, rapid declines on stock market and LME lead market weighed down market sentiment again, leaving stronger bearish sentiment. Supplier interest in moving goods increased, causing traded prices to drop to RMB 14,500-14,550/mt, and prices for goods from Gejiu were at low levels of around RMB 14,400/mt. Domestic lead prices have returned to a downward track after a brief round of gains, and prices for well-known branded goods will likely drop to RMB 14,300-14,500/mt.

Zinc:
SHFE zinc prices opened low but moved higher, and later fluctuated lower again in the afternoon. SHFE 1010 zinc contract prices dipped following China's stock markets after temporarily soaring to RMB 14,795/mt in the morning session, and finally closed at RMB 14,440/mt, down RMB 75/mt compared with the previous trading day, or down 0.51%. Positions of SHFE 1010 zinc contract increased by 18,826 lots to 287,000 lots, while trading volumes increased further to 2.62 million lots. The turnover rate reached 912.78%, an indication of intensifying struggles between long and short positions, so SHFE zinc prices will face difficulties in holding steady at RMB 14,500/mt.

Spot zinc market was much weaker than SHFE zinc market. Although downstream inquiries were up when zinc prices were higher, most of them stayed out of the market once zinc prices moved lower. However, cargo-holders were eager to move goods in order to generate cash. #0 zinc was traded around RMB 14,450/mt in the morning, and later traded prices for #0 zinc fell to between RMB 14,350-14,400/mt in the afternoon following falling SHFE zinc prices, but almost no deals were made. #1 zinc enjoys no advantages recently amid ample supply and lower prices of #0 zinc, so transactions of #1 zinc were very sluggish. Spot zinc prices will struggle around RMB 14,500/mt in the near term.    

Tin:
LME tin prices opened at USD 17,715/mt on June 30th and closed at USD 17,400/mt, down USD 100/mt from a day earlier, with highest price climbing to USD 17,720/mt and the lowest price touching USD 17,200/mt. Daily trading volumes were 175 lots and positions were 18,267 lots. The lower-than-expected US economic data released on June 30th dampened market sentiment. On July 1st, LME tin prices opened at USD 17,375/mt and reached the highest level at USD 17,400/mt, with prices fluctuating narrowly. The US dollar advanced slightly to the latest 86.2, slightly weighing on base metal prices.

In the Shanghai tin spot market, some smelters lowered offers slightly from a day earlier due to continuous decline of LME tin prices and sluggish market transactions, with offers of major brand tin between RMB 139,500-143,000/mt. Traders had limited profit due to relatively firm offers from smelters, leading to very limited supply of goods in the market. Few major brand tin was traded at RMB 139,500/mt and unknown brand tin was traded around RMB 138,000/mt. Wait-and-see sentiment from downstream consumers was strong and prices still have difficulty in advancing, despite that supply of goods was reduced. In general, market was extremely quiet.

Nickel:
LME nickel prices opened at USD 19,210/mt and closed at USD 19,650/mt on June 30th, up USD 440/mt from a day earlier, with the highest price at USD 19,750/mt and the lowest price at USD 18,933/mt. Daily trading volumes were 2,357 lots and positions were 87,891 lots. On June July 1st, LME nickel prices opened at USD 19,350/mt, with highest price at USD 19,440/mt and the lowest price at USD 19,270/mt, down USD 300/mt from a day earlier, with prices fluctuating narrowly.  

In the Shanghai nickel spot market, trading sentiment was relatively gloomy. Traded prices of nickel from Jinchuan Group were at RMB 153,000/mt and traded prices of imported nickel were between RMB 152,000-152,500/mt. Transactions were limited due to few enquiries in the market, and purchasing interest from traders was low due to narrow price spread, with strong bearish sentiment reported in the market. There were almost no transactions for imported nickel.

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

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