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SMM Daily Review - 2010/7/8 Base Metals Market
Jul 9,2010 10:41CST
data analysis

SHANGHAI, July 9 (SMM) --


Supported by LME copper prices, SHFE copper market on Thursday moved upward after a high open, but the range of rebounds was again depressed by falling China A-share market. SHFE copper for October delivery copper contract, the most active one, opened at RMB 53,300/mt, reaching as high as RMB 53,460/mt in early trading, but retreated due to lack of buying interest. SHFE October delivery copper prices rebounded after falling as low as RMB 52,970/mt, but finally closed at nearly a daily low of 53,000/mt due to pressure from position closing, up RMB 720/mt or 1.38%. Positions for SHFE October delivery copper contract were down 9,792 lots, slightly reducing positions to 196,534 lots, while trading volumes increased to 417,700 lots. SHFE copper prices have already climbed above the 30-day moving average, but technical indicators have crossed each other, with no clear direction available, and pressure at RMB 53,500/mt remains.

In a contrast to previous days, spot supply increased on Thursday, and with a trend of falling prices. Spot premiums dropped to positive RMB 50-100/mt, and in the afternoon business fell further to RMB 0-positive RMB 50/mt, and imported hydro-copper were at discounts of RMB 50/mt. Downstream producers took a wait-and-see attitude when prices approached RMB 54,000/mt, and meanwhile supply increased, a sign of higher interest in moving goods for cash generation among cargo-holders. In the morning business, transactions were made in a narrow range of RMB 53,700-53,800/mt, and fell to RMB 53,650-53,750/mt in the afternoon trade. On Thursday, price gap between standard-quality and high-quality copper was only at RMB 50/mt, leaving no price competitiveness for standard-quality copper. SMM believes spot copper prices will likely continue to struggle at RMB 54,000/mt, waiting for further market direction.


SHFE aluminum prices opened high but moved lower, with aluminum prices rising at a slower pace compared with other base metals. SHFE 1009 aluminum contract prices climbed slightly to RMB 14,950/mt after opening at RMB 14,935/mt, but later slipped all the way following weakening China's A-shares market, with prices hitting the daily low of RMB 14,860/mt, and finally prices ended at RMB 14,895/mt, up USD 40/mt compared with the previous trading day, or up 0.27%. Overall trading sentiment was sluggish. Total trading volumes were 73,010 lots, and total positions increased by 1,732 lots to 253,000 lots. Meanwhile, positions of SHFE 1010 aluminum contract grew significantly, with this contract gradually becoming the most active one.

Spot aluminum prices failed to keep pace with SHFE aluminum prices, and spot discounts expanded slightly. Traders moved goods actively, but downstream fabricators still stayed out of the market amid falling SHFE aluminum prices, with actual trading sentiment lackluster. The moving range of aluminum prices moved higher steadily this week, but market players' willingness to accept higher prices and their optimism with regard to market outlook is fading, further limiting any increases in aluminum prices in the future.      


Boosted by rising LME lead market, domestic lead prices moved higher on Thursday. Offers in the Shanghai market were quoted in the RMB 14,700-14,900/mt range, but downstream buying interest remained low, keeping trading sentiment remain lackluster. In addition, purchasing interest in low-priced goods improved following rising prices. Transactions were generally made in the RMB 14,700-14,800/mt range.


SHFE 1010 zinc contract prices closed at RMB 15,345/mt, with the highest prices reported at RMB 15,560/mt, and prices faced strong resistance between RMB 15,600-15,800/mt. In addition, trading volumes of SHFE 1010 zinc contract continued to shrink by 300,000 lots to 1.72 million lots, and positions of SHFE 1010 zinc contract also dropped by 13,356 lots to 290,000 lots, reflecting market players withdrew capital from the market.

In the spot market, #0 zinc was traded between RMB 15,200-15,250/mt in Shanghai, with spot discounts ranging between RMB 140-180/mt against SHFE 1009 zinc contract prices. Spot zinc prices fell to RMB 15,150/mt in the afternoon, but trading volumes remained limited. #1 zinc was traded in the RMB 15,150-15,200/mt range, with market supply of #1 zinc remaining limited.


LME tin prices opened at USD 17,700/mt on Wednesday and closed at USD 17,660/mt, up USD 210/mt from a day earlier, with highest price climbing to USD 17,700/mt and the lowest price touching USD 17,050/mt. Daily trading volumes were 133 lots and positions were 17,908 lots. LME tin prices opened at USD 17,690/mt on Thursday, and touched the lowest level at USD 17,600/mt, with prices fluctuating narrowly. The US dollar reached the newest at 83.98, slightly weigh on base metal prices.

In the Shanghai tin spot market, some smelters lifted offers on Thursday, but trading volumes still remained low. Mainstream offers were unchanged from a day earlier, with only few traders slightly lifting offers. Traded prices of tin from Yunnan Tin group were between RMB 138,500-139,000/mt and traded prices of tin from Yunnan Gejiu Zili Metallurgy Co were around RMB 138,800/mt, while mainstream traded prices of unknown brand tin were around RMB 138,000/mt. Traders had difficulties in replenishing stocks as smelters were reluctant to move goods at low prices, leading to limited supply of goods in the market. Supply of unknown brand tin was also limited in the market.  


LME nickel prices opened at USD 19,000/mt and closed at USD 19,225/mt on Wednesday, up USD 300/mt from a day earlier, with the highest price at USD 19,225/mt and the lowest price at USD 18,800/mt. Daily trading volumes were 1,538 lots and positions were 87,550 lots. LME nickel prices opened at USD 19,250/mt on Thursday, climbing to the highest level at USD 19,440/mt and touching the lowest level at USD 19,250/mt, with latest price at USD 19,331/mt, up USD 110/mt from a day earlier. LME nickel prices climbed to test USD 19,500/mt in the morning session, and gradually fluctuated narrowly downward to test USD 19,250/mt in the afternoon session. Lacking directions, nickel prices will still remain fluctuation trend, but may rebound slightly along with other base metal prices in the short term.

In the Shanghai nickel spot market, overall trading sentiment was sluggish. Prices of nickel from Jinchuan Group climbed slightly, with traded prices between RMB 154,500-155,000/mt, and some traders made replenishment of nickel from Jinchuan Group. Transactions of imported nickel were relatively sluggish, with traded prices remaining at RMB 153,000/mt, and there were almost no downstream consumers in the market. Most traders believed that prices will remain flat in the following week. A survey conducted by Local Tax of Xinghua city of Jiangsu province, orders received by 10 small and medium-sized companies in June were reduced by 1/3 MoM. In addition, risks of losses are expanding due to previous purchases of high-priced nickel plate. The current sluggish transactions and the rising prices of complementary materials and transportation fees cornered many producers at breakeven point. In this context, producers mostly adopted a wait-and-see attitude, and they may cut prices to promote sales so as to avoid production suspension.

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

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