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SMM Daily Review - 2010/7/7 Base Metals Market
Jul 8,2010 10:26CST
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SHANGHAI, July 8 (SMM) --


SHFE copper market on Wednesday moved downward after a high open, moving below daily moving average for the trading day. SHFE copper for October delivery tested RMB 52,610/mt after opening high at RMB 52,500/mt, but met with failure. The October delivery copper prices were plagued by domestic A-share market’s failure to climb higher, and fell as low as RMB 52,010/mt in the afternoon session before ending at RMB 52,130/mt, up RMB 150/mt, greatly narrowing gains made in the morning session. Positions for SHFE October delivery copper contract remained above 206,000 lots after an increase of 2,746 lots, and positions for all contracts were up 1,590 lots. Trading volumes slightly narrowed to 413.900 lots. SMM believes SHFE copper prices will continue to fluctuate in the RMB 52,500-52,000/mt range.

In the spot market, rising prices on the SHFE copper market helped spot copper prices stand above RMB 53,000/mt. Transactions in the morning trade were made in the RMB 53,150~53,250/mt range, with premiums at positive RMB 200-250/mt. Market supply increased, especially for domestic goods, leaving difficulties for spot premiums in moving higher. Consumption was depressed due to little buying interest at prices above RMB 53,200/mt, and strong short sentiment. Cargo-holders showed higher interest in moving goods, given depressed sales, falling A-share market, and pressed copper prices on the SHFE copper market. In the afternoon trade, spot premiums fell to positive 100-200/mt due to lackluster trading sentiment and falling SHFE copper prices, and with deals in the RMB 53,000-53,200/mt. SMM believes spot copper prices will continue to move around RMB 53,000/mt. 


SHFE aluminum prices opened higher in the morning session positively affected by rising LME aluminum prices, and SHFE 1009 aluminum contract prices opened at the 30-day moving average of RMB 14,900/mt, and later soared to the daily high of RMB 14,940/mt. However, market players were skeptical about the sustainability of aluminum price increases, and SHFE 1009 aluminum contract prices faced heavy pressure after standing at the 30-day moving average for the first time over three months, and later fluctuated lower despite that China’s A-shares market showed moderate performance, with prices dipping to as low as the 10-day moving average of RMB 14,800/mt and finally ending at RMB 14,820/mt, up RMB 20/mt compared with the previous trading day, or up 0.14%. Trading volumes shrank to 49,042 lots, and total positions increased by 2,878 lots to 251,268 lots.

In the spot market, aluminum prices inched up due to rising SHFE aluminum prices, but a lack of long position momentum during spot trading hours on the SHFE aluminum market allowed buyers to adopt a wait-and-see attitude. Meanwhile, the approach of seasonal low demand period eroded expectations of future aluminum demand, and downstream buying interest was low, with overall trading sentiment relatively lackluster. A portion of traders in north China moved goods at lower prices in order to ease sales pressure. The low-end of aluminum prices will rise further in the short term in view of superficial declines in aluminum inventories, but aluminum consumption in the following months will determine aluminum price trends, and SMM predicts aluminum prices will continue to fluctuate in a narrow band.     


Falling LME lead prices weighed down domestic lead prices. Prices in the Shanghai market were quoted at RMB 50/mt lower for the day, with deals mainly in the RMB 14,600-14,750/mt range. Trading sentiment dropped from a day earlier. Market players generally believe that domestic lead prices will show lack of upward momentum to climb above RMB 15,000/mt. 


SHFE 1010 zinc contract prices surged to RMB 15,490/mt after opening at RMB 15,450/mt, but later slipped, with prices being pressed by the daily moving average all day. SHFE 1010 zinc contract prices dipped to as low as RMB 15,150/mt, and finally closed at RMB 15,195/mt, down RMB 60/mt compared with the previous trading day, or down 0.39%. Positions of SHFE 1010 zinc contract declined by 21,264 lots to 305,248 lots, and trading volumes were 2.08 million lots, with trading activity falling slightly. Although SHFE zinc prices received support at RMB 15,000/mt, any upward room for zinc prices is limited. SMM predicts SHFE 1010 zinc contract prices will continue to move between RMB 15,100-15,500/mt.

In the spot market, transactions remained weak. #0 zinc was traded around RMB 15,000/mt, while #1 zinc spot supplies were limited, narrowing the price spread between #1 zinc and #0 zinc. Downstream producers still stayed out of the market. Falling SHFE zinc prices depressed cargo-holder confidence, and their willingness to sell off goods gained, but no market response was reported. Spot zinc prices will continue to move around RMB 15,000/mt.


LME tin prices opened at USD 17,430/mt and closed at USD 17,450/mt on Tuesday, up USD 150/mt from a day earlier, with highest price climbing to USD 17,700/mt and the lowest price touching USD 17,399/mt. Trading volumes were 134 lots and positions were 17,803 lots. LME tin prices opened at USD 17,700/mt on Wednesday, and touched the lowest level at USD 17,300/mt, weighed down by the US dollar. The ongoing uncertainties of macro economy will continue to weigh base metal prices.
In the Shanghai tin spot market, some smelters lifted offers when LME tin prices climbed in the morning trading session, but offers later slipped to yesterday’s level when LME tin prices declined and downstream purchases were sluggish. Goods circulating in the market were mainly unknown brand tin with traded prices between RMB 137,800-138,500/mt. Traded prices of major brand tin were between RMB 138,500-139,000/mt, and transactions of unknown brand tin were more sluggish than unknown brand tin. Few traders offers tin from Yunnan Tin group with prices as low as RMB 138,500/mt, resulting in relatively brisk transactions. In general, overall trading sentiment was still lackluster.


LME nickel prices opened at USD 18,600/mt and closed at USD 18,925/mt on Tuesday, up USD 175/mt from a day earlier, with the highest price at USD 19,175/mt and the lowest price at USD 18,545/mt. Daily trading volumes were 1,905 lots and positions were 88,215 lots. On Wednesday, LME nickel prices opened at USD 19,000/mt, with highest price at USD 19,110/mt and the lowest price at USD 18,800/mt, down USD 50/mt, with latest price at USD 18,880/mt. LME tin prices declined after climbing to test USD 19,110/mt in the afternoon session, and fluctuated weakly around USD 19,000/mt. It is expected that LME tin prices will continue fluctuation tread without strong momentum to make any breakthrough in the short term.

In the Shanghai nickel spot market, transactions remained lukewarm on Wednesday. Transactions were dominated by traders, and few downstream consumers entered the market. Traded prices of nickel from Jinchuan Group were between RMB 153,000-153,500/mt and traded prices of imported nickel were between RMB 151,500-152,000/mt. 

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


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