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SMM Daily Review - 2010/7/6 Base Metals Market
Jul 7,2010 10:12CST
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SHANGHAI, July 7(SMM) --


On Tuesday, Shanghai Stock Index regained the 2400-point mark, boosting market sentiment. Coupled with a rally on the LME copper market from a weaker US dollar, SHFE copper market moved higher all the way. SHFE copper for October delivery, the most active one, gained all the way after opening at RMB 51,600/mt, and reached as high as RMB 52,380/mt in the afternoon session, and finally closed at RMB 52,250/mt, up RMB 20/mt. Trading volumes and positions continue to grow. Positions for SHFE October delivery copper contract were up 11,346 lots to 203.500 lots, and trading volumes exceeded 560,000 lots, with turnover rate of 275.83%. Despite of intense struggles between shorts and longs during the trading day, all moving averages crossed each other, leaving no clear market direction. Hence, SMM believes SHFE copper prices will continue to fluctuate.

In the spot market, supply remained tight, domestic goods in particular, and offers for imported copper were firm. Spot premiums gained to positive RMB 250-350/mt, with deals made between RMB 52,850~53,050/mt in the morning business. Imported copper continued to dominate market supply. Copper prices on the SHFE market climbed higher in the afternoon session, while SHFE current month copper contract met resistance at RMB 53,000/mt, suggesting that time is still needed for spot market to accept this price level. Spot premiums dropped slightly in the afternoon trade when copper prices on the SHFE market rose, and traded prices advanced to RMB 52,900-53,100/mt. Sales at prices above RMB 53,000/mt were slow, and supply of goods dropped significantly. SMM believes spot premiums will remain firm, and this will support copper prices on the SHFE market.

SHFE aluminum prices remained strong driven by positive market fundamentals in China, and SHFE 1009 aluminum contract prices dipped to RMB 14,715/mt after opening at RMB 14,765/mt, with strong support reported at the 5-day moving average. Later, SHFE 1009 aluminum contract prices fluctuated higher following rebounding China’s stock markets, with the highest prices reported at RMB 14,845/mt, and finally prices ended at RMB 14,810/mt, up RMB 10/mt compared with the previous trading day, or up 0.07%. Total positions declined by 376 lots to 248,390 lots, and trading volumes were only 57,570 lots.

In the spot market, overall market sentiment was bullish given tight supply, but selected traders said small-scale aluminum profile producers in east China reported slight declines in their orders, helping reduce their purchases of aluminum ingot. Spot aluminum inventories continue to drop, and SHFE aluminum prices are expected to continue to fluctuate in a narrow band in the short term with the support of LME aluminum prices and bullish spot markets.   


Domestic lead prices remained firm, as domestic lead producers remained unwilling to move goods, and kept prices solid. Prices were quoted between RMB 14,650-14,700/mt for “Gejiu” lead, while prices for well-known branded goods were in the RMB 14,800-14,850/mt range. Stabilizing LME lead prices from a slump over the past week boosted downstream sentiment, and so transactions on Tuesday turned better from a day earlier. However, overall trading sentiment failed to improve totally, as it is still a traditional low demand period. Transactions in the Shanghai market were generally made in the RMB 14,650-14,800/mt range.


SHFE zinc prices opened low but moved higher, with prices climbing all the way following China’s stock markets. SHFE 1010 zinc contract prices opened at RMB 15,005/mt, and closed at RMB 15,390/mt, with the highest prices reported at RMB 15,410/mt, and stronger long position momentum helped push up zinc prices. Trading volumes of SHFE 1010 zinc contract remained at 2.41 million lots, and positions increased by 38,000 lots to 327,000 lots at closing. Positions of SHFE 1010 zinc contract have risen by 64,000 lots at 14:30 pm, but declined later, indicating a number of investors exited from the market before closing in order to reduce risks of wild fluctuations in zinc prices. Technical indicators show signs of rising, so zinc prices are expected to receive strong support from growing long positions in the short term if no negative news is reported, but special focus should be put on the selling pressure possibly faced by SHFE 1010 zinc contract prices between RMB 15,800-16,000/mt.  

Zinc spot markets were extremely bearish. As zinc price increases were mainly driven by speculative funds and China’s stock markets, so no positive response from downstream producers was reported. Spot trading sentiment was sluggish when spot prices were above RMB 15,000/mt, and was upbeat when spot prices were below this level. #0 zinc was traded between RMB 15,000-15,050/mt in Shanghai, and offers for #0 zinc were between RMB 15,100-15,150/mt at noon, but trading volumes were limited. #1 zinc was traded around RMB 15,000/mt in the market.


LME tin prices opened at USD 17,225/mt and closed at USD 17,300/mt on Monday, down USD 50/mt from last Friday, with the highest price at USD 17,350/mt and the lowest price at USD 17,050/mt. Daily trading volumes were 111 lots and positions were 18,043 lots. Base metal prices largely stayed stable, holding well against bearish impact from a softer European equity market and weaker Euro. On Tuesday, LME tin prices opened at USD 17,430/mt, and advanced slightly to USD 17,497/mt due to support from weaker US dollar and rebound of Chinese equity market, with the US dollar reaching the latest 84.2. Base metal prices were largely weighed by the European debt issue and concerns over slower growth of Chinese economy, and LME tin prices are expected to move weakly.

Smelters lowered offers steadily due to sluggish consumption, and offers from major brand tin smelters were between RMB 138,000-140,000/mt. Overall trading sentiment was quiet in the Shanghai tin spot market, and consumption was very sluggish, with small amount of goods arriving. Major brand tin, with limited trading volumes, was traded between RMB 138,500-139,500/mt and unknown brand tin was traded between RMB 137,800-138,000/mt.


LME nickel prices opened at USD 18,950/mt and closed at USD 18,750/mt on Monday, down USD 248/mt from a day earlier, with the highest price at USD 19,239/mt and the lowest price at USD 18,650/mt. Daily trading volumes were 1,053 lots and positions were 88,412 lots. On Tuesday, LME nickel prices opened at USD 18600/mt, reaching the highest level at USD 19,097/mt and touching the lowest level at USD 18,545/mt, with the latest at USD 19,000/mt reported, up USD 250/mt from a day earlier. The LME nickel prices opened low but advanced later. Prices were dampened due to tentative agreement reached between Vale and strike workers, but later advanced from a weaker US dollar and slight rebound of China equity market, with prices fluctuating around USD 19,000/mt.

In the Shanghai nickel spot market, low-priced goods was in shortage as LME tin prices advance after a low open, and overall trading sentiment was relatively lukewarm. Traded prices of nickel from Jinchuan Group were between RMB 152,000-153,000/mt and traded prices of imported nickel were between RMB 150,800-151,500/mt, with deals mostly done between traders.

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

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