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SMM Daily Review - 2010/7/9 Base Metals Market
Jul 12,2010 10:12CST
smm insight

SHANGHAI, July 12 (SMM) –

SHFE copper market on Friday opened slightly lower. In the morning session, SHFE copper market experience small fluctuations, and advanced at noon due to rising China A-share market. SHFE copper for October delivery opened at RMB 53,090/mt, and fluctuated narrowly around RMB 53,000/mt in the morning session. After 10:30 am, the most actively-traded copper contract hit a session high of RMB 53,800/mt due to rallying China A-share market, but fell back in the afternoon session. Finally, the October delivery copper contract closed at RMB 53,640/mt, up RMB 450/mt or 0.85%. Positions for SHFE Copper delivery copper contract were up 8,826 lots. SHFE copper market has rallied to the 30 and 60-day moving average range, with upward momentum available on technical indicators, and the next target will be RMB 54,000/mt. Presently, SHFE near-term contract months are stronger than forward month contracts, and SHFE current month copper prices have climbed above RMB 54,000/mt, but the price gap with other contracts is further narrowing.

In the spot market, spot premiums dropped despite of a rally on the SHFE copper market. In the morning, spot premiums were quoted between positive RMB 50-120/mt. Due to limited supply of domestic goods, premiums for goods from Jiangxi Copper were firm at positive RMB 150/mt, helping traded prices rise from RMB 53,800/mt to RMB 54,100/mt. Supply of domestic standard-quality copper was very limited, and the price gap between domestic standard-quality copper and imported copper was small. With rising prices on the SHFE copper market in the afternoon business, the SHFE/LME copper price ratio rose, improving supply of imported goods, helping deals even trade at discounts, with traded prices near at RMB 54,000/mt. Downstream producers gradually took a wait-and-see attitude after prices gained RMB 1,000/mt during the past week. SHFE copper stocks dropped 7,099 mt last week, suggesting the price band was still acceptable to the market. 

The relatively weak LME aluminum prices on July 8th failed to lend support to SHFE aluminum prices, and SHFE 1009 aluminum contract prices slipped to the daily low of RMB 14,810/mt after opening at RMB 14,900/mt on July 9th. China's A-shares advanced strongly as China's Central Bank announced to continue its relatively loose monetary policy in 2H 2010, with the Shanghai Composite Index rising by 2.31% to 2470.92 points. SHFE aluminum prices picked up in response, and erased most of previous losses, with prices finally ending at RMB 14,885/mt, down RMB 25/mt, or down 0.17%. Total trading volumes were 47,668 lots, and total positions declined by 110 lots to 252,890 lots.

Spot market was sluggish, and traders kept offers firm when SHFE aluminum prices slid, with spot discounts narrowing slightly as a result. However, downstream buying interest was low before the weekend, with most deals made between traders. SHFE 1009 aluminum contract prices hit the RMB 15,000/mt mark, and SMM believes SHFE 1009 aluminum contract prices will struggle at this level in the near term, with special focus putting on other base metals prices trends.

Trading sentiment in domestic lead market saw no improvement on the last trading day of the week. Traders and smelters said downstream producers generally showed low buying interest in purchases at existing prices after discontinuous price rises over the past week. Currently, sales of long-term contracts for domestic lead producers were good, while their controls on sales in bulk helped keep prices at a relatively high level. 

SHFE 1010 zinc contract prices moved narrowly around RMB 15,260/mt in the morning session, and later edged higher following China's A-shares market after 11:00 am, with prices later mainly fluctuating around RMB 15,350/mt. SHFE 1010 zinc contract prices finally closed at RMB 15,360/mt, and positions declined by 4,338 lots, and trading volumes increased by 140,000 lots to 1.85 million lots. However, long position momentum failed to gain further, and whether or not SHFE 1010 zinc contract prices can challenge the previous pressure level of RMB 15,800-16,000/mt remains unknown.

In the spot market, #0 zinc was mainly traded around RMB 15,100/mt in Shanghai following fluctuating SHFE zinc prices, with spot discounts ranging between RMB 200-220/mt against SHFE 1010 zinc contract prices, while #1 zinc was traded between RMB 15,050-15,100/mt. Market transactions improved on the last trading day of last week, and downstream producers made purchases when zinc prices slipped. However, there is no doubt that zinc demand has weakened. 

LME tin prices opened at USD 17,690/mt and closed at USD 17,525/mt last Thursday, down USD 135/mt from a day earlier, with highest price at USD 17,690/mt, and the lowest price at USD 17,525/mt. Daily trading volumes were 112 lots and positions were 17,732 lots. LME tin prices opened at USD 17,690/mt and reached the highest level at USD 17,800/mt last Friday. Although prices remained above all moving averages, prices are still expected to fluctuate weakly due to ongoing uncertainties of macroeconomic impacts. 

In the Shanghai tin spot market, offers from smelters remained stable last Friday. Transactions were still sluggish, with traded prices of tin from Yunnan Tin group were between RMB 138,500-139,000/mt and traded prices of unknown brand tin between RMB 137,800-138,000/mt. Overall trading sentiment was soft due to the arrival of seasonal low-demand period. Traders told the that sparse enquires, along with limited supply of goods made market condition extremely sluggish.  
LME nickel prices opened at USD 19,250/mt and closed at USD 19,375/mt last Thursday, up USD 300/mt from a day earlier, with the highest price at USD 19,500/mt and the lowest price at USD 19,231/mt. Daily trading volumes were 1519 lots and positions were 88,334 lots. Inventories reduced by 390mt to 121,326mt. LME nickel prices opened at USD 19,375/mt last Friday, reaching the highest price at USD 19,545/mt and touching the lowest price at USD 19,300 lots, with the latest at USD 19,458/mt, up USD 83/mt from a day earlier. The news that China will continue a moderately easy monetary policy stimulated Shanghai A share market to rise rapidly, lending upward momentum to base metal prices to certain extent.

In the Shanghai nickel spot market, transactions were moderate last Friday, and traded prices of nickel from Jinchuan Group were between RMB 155,000-155,500/mt. Some #998 nickel plate from Jinchuan Group entered market with favorable prices. Transactions of imported nickel were lukewarm, with traded prices between RMB 153,000-154,000/mt, and downstream consumers still remained cautiously.


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

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