SMM Daily Review - 2010/7/5Base Metals Market

SHANGHAI, July 6 (SMM) --

Copper

SHFE copper market moved with movements on China's A-shares markets on Monday. SHFE copper for October delivery opened at RMB 52,000/mt, and briefly fell to RMB 51,860/mt due to China's A-shares markets' low open. Later, SHFE October delivery copper prices reached as high as RMB 52,160/mt in the afternoon session, supported by rebounding stock markets, well above the daily average. Finally, the October delivery copper contract closed at RMB 52,260/mt, up RMB 580/mt or 1.12%. Positions for SHFE October delivery copper contract were down 3,346 lots, and positions for all contracts fell 3,368 lots. Trading volumes and positions continued to grow. Trading volumes for SHFE October delivery copper contract were 486,000 lots, and positions exceeded 192,000 lots. SMM believes SHFE copper prices will find support at RMB 51,800/mt, and will meet resistance at RMB 52,500/mt in the short term. The Agricultural Bank of China will start subscriptions online on July 6th, and particular attention should be paid to performance in domestic stock markets in response to the subscriptions.

Spot premiums were still on the increase. In the morning session, premiums were offered between positive RMB 200-300/mt, dealing between RMB 52,850~53,100/mt. Although transactions were not as good as last Friday, trading sentiment was positive. Supply remained tight, and with limited supply of domestic copper, leaving premiums for domestic high-quality copper high. The SHFE/LME copper price ratio on Monday rallied to around 8.02, and imported copper dominated market supply. In the afternoon trade, copper prices on the SHFE market moved higher, with unavailability of domestic gods, and premiums for imported copper fell slightly to positive RMB 150-250/mt, and traded prices stood above RMB 53,000/mt, climbing to RMB 53,250/mt. It is generally believed that market supply is tight, and domestic copper smelters are facing problems of raw material supply. However, macro-economic environment remains negative, and this will depress upward momentum for copper prices.

Aluminum

SHFE aluminum prices edged higher, and SHFE 1009 aluminum contract prices opened slightly higher at RMB 14,750/mt, with prices moving narrowly in the morning session. SHFE 1009 aluminum contract prices began to climb during spot trading hours, but later slipped after hitting the daily high of RMB 14,875/mt, and then mainly moved above RMB 14,800/mt in the afternoon, with heavy pressure reported above RMB 15,000/mt. SHFE 1009 aluminum contract prices finally closed at RMB 14,810/mt, up RMB 105/mt compared with the previous trading day, or up 0.71%. Total positions declined slightly by 1,338 lots to 248,766 lots, while trading volumes were only 69,104 lots.

Spot trading sentiment was bullish. Some aluminum producers and suppliers were reluctant to move goods, tightening spot market supplies, and traders raised offers in response. Meanwhile, downstream buying interest was higher, and overall transactions were moderate. Mainstream traded prices were around RMB 14,620/mt after SHFE aluminum prices dipped in the morning session. Shot-term market sentiment is upbeat, and the financial attribute also helps support base metals prices, and the low-end of aluminum prices move higher gradually, with signs of rising, but any price increases will be limited.

Lead

Brisk trading sentiment seen last Friday failed to persist on Monday's market. As it is now a traditional weak demand period, bargain hunting by downstream producers is short-lived. Prices for high-quality lead in the Shanghai market was quoted at RMB 14,800-14,850/mt, with sparse transactions, and deals were generally made between RMB 14,650-14,750/mt for goods from Yunnan. Domestic lead producers became unwilling to move goods again after domestic lead prices failed to climb to RMB 15,000/mt.

Zinc

SHFE 1010 zinc contract prices mainly moved narrowly around RMB 15,200/mt all day after opening slightly higher at RMB 15,100/mt. SHFE 1010 zinc contract prices edged higher at noon led by SHFE copper prices, with struggles between long and short positions remaining intense. Trading volumes of SHFE 1010 zinc contract reached as high as 2.36 million lots, while total positions were 2.65 million lots. A portion of long positions exited from the market before closing, dragging down SHFE 1010 zinc contract prices, with prices finally closing at RMB 15,230/mt, up 2.32%. The daily high of SHFE 1010 zinc contract prices was reported at RMB 15,325/mt. Positions of SHFE 1010 zinc contract declined by 13,600 lots to 288,000 lots.

However, the rising SHFE zinc prices failed to boost zinc spot markets on the first trading day of this week, with overall spot trading sentiment reported bearish. #0 zinc was traded between RMB 14,950-15,000/mt in Shanghai, with spot discounts moving around RMB 150/mt against SHFE 1009 zinc contract prices, while #1 zinc was traded around RMB 14,950/mt, and the tight supply allowed prices for #1 zinc to remain firm. However, downstream buying interest was low when spot zinc prices moved around RMB 15,000/mt given previous wild price fluctuations, and downstream pessimism was gaining. SHFE 1010 zinc contract prices will continue to face strong resistance at the previous high of RMB 15,500/mt, and sluggish spot market sentiment will dampen any upward momentum in zinc prices, with high possibility that speculators will report sell-offs at higher prices in the short term.

Tin

LME tin prices opened at USD 16,850/mt and closed at USD 17,350/mt last Friday, up USD 300/mt from a day earlier, with the highest price at USD 17,390/mt and the lowest price at USD 16,850/mt. Daily trading volumes were 267 lots and positions were 17,993 lots. Lower-than-expected non-farm employment data released last Friday suggested slow economic recovery, and investors' confidence towards future economy was fragile. On Monday, LME tin prices opened at USD 17,225/mt during the Asia trading period, and fluctuated narrowly around USD 17,300/mt. Weak equity market as well as concern over economic recovery continued to weight market sentiment. In this context, performance of LME tin prices may not be optimistic this week.

In the Shanghai tin spot market, domestic smelters continued to keep firm offers, with offers of tin from Yunnan Tin group at RMB 143,000/mt and offers of tin from other smelters between RMB 138,500-140,000/mt. Supply of major brand tin was very limited, with mainstream offers between RMB 138,500-139,000/mt, while transactions were few, with few traders selling tin from Yunnan Tin group at RMB 138,600/mt. Unknown brand tin dominated market transactions with prices between RMB 137,800-138,000/mt. LME tin prices continued to fluctuated, with more and more downstream companies adopting a wait-and-see attitude. Prices are moving without any upward momentum and are expected to remain stable this week, but possibility for prices to fall slightly still exists.

Nickel

LME nickel prices opened at USD 19,150/mt and closed at USD 18,998/mt last Friday, down USD 102/mt from a day earlier, with the highest price at USD 19,450/mt and the lowest price at USD 18,710/mt. Daily trading volumes were 1,511 lots and positions were 87,601 lots. On July 5th, LME nickel prices opened at USD 18,950mt, reaching the highest level at USD 19,239/mt and touching the lowest price at USD 18,900/mt, up USD 58/mt from a day earlier. Vale reached a temporarily agreement with strike workers, and it is expected that prices will remain weak fluctuation trend.

In the Shanghai nickel market, transactions improved to certain extent, and enquires increased along with improving trading sentiment and rising prices. However, suppliers were reluctant to move goods when prices were rebounding. Traded prices of nickel from Jinchuan Group were between RMB 152,500-153,000/mt and traded prices of imported nickel were between RMB 151,000-151,500/mt. Transactions between traders were brisk, with ample supply of nickel from Jinchuan Group reported in the market, and transactions from downstream consumers accounted for around 30% of total transactions.

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

 
Copyright © SMM. All Rights Reserved

None of this material may be used for any commercial or public use in any forms or means, without the prior written consent of SMM. For reproduction issue, please contact us by email: service.en@smm.cn