SMM Daily Review - 2010/7/12 Base Metals Market

SHANGHAI, July 13 (SMM) –

Copper
SHFE copper market fell back on Monday after failing to test higher. In the morning session, SHFE copper for October delivery advanced to RMB 53,750/mt due to a rally in China’s domestic stock markets, but later showed lack of further upward momentum. In the afternoon session, the most actively-traded copper contract on the SHFE market moved lower all the way following rising US dollar, and closed at near a session low of RMB 53,060/mt, down RMB 350/mt or 0.66%. Positions for SHFE October delivery copper contract were up 4,392 lots to around 210,000 lots. Trading volumes dropped slightly by 26,800 lots to 411,000 lots. SHFE copper market is continuing to move in the 30 and 60-day moving average, and with upward momentum still available on technical indicators. However, whether or not SHFE October delivery copper prices will hold at RMB 53,000/mt or find support at RMB 52,500/mt depends on the trend of US dollar, LME copper price movements, and market sentiment in particular.

In the spot market, transactions remained weak, with a strong wait-and-see attitude. Spot premiums were quoted at positive RMB 50-100/mt in the morning trade, dealing in the RMB 54,000-54,100/mt range. Market supply was sufficient following low buying interest. Sluggish trading sentiment resulted in discounts and premiums between negative RMB 50-positive RMB 50/mt, causing traded prices to fall to RMB 53,700-53,950/mt, highlighting that low market acceptance to copper prices at RMB 5,4000/mt after gains over the past week, and a traditionally low demand period in July. Market mixed views expanded towards prices at this price level. Although the delivery date nears, spot premiums are narrowing, and with weak transactions, suggesting pessimistic attitude among some market participants; some other believes that copper prices will advance after learning that China’s Central Bank will continue to implement a loose monetary policy in 3Q, which will inject confidence into stocks, and commodity markets. However, most market players are not excessively pessimistic towards outlook, while believe any price gains will be limited. 

Aluminum
SHFE 1009 aluminum contract prices opened slightly higher at RMB 14,880/mt in the morning session positively affected by rising LME aluminum prices last Friday, and later jumped to the daily high of RMB 14,925/mt, but slipped later, with prices mainly fluctuating weakly around RMB 14,800/mt. SHFE 1009 aluminum contract prices slumped at closing following other base metals prices, with prices hitting the daily low of RMB 14,810/mt and finally closing at RMB 14,815/mt. Total trading volumes were 49,728 lots, and total positions declined by 176 lots to 252,714 lots.
 
Spot market was sluggish as well. Traders kept offers firm, but downstream buying interest was low, resulting in lackluster trading sentiment. Aluminum prices rebounded slightly last week, but selling pressure strengthened following rising aluminum prices, and market pessimism was gaining as well. In this context, aluminum prices will likely undergo corrections in the short term, but SHFE 1009 aluminum contract prices will still find support at the previous low of RMB 14,600/mt. 
 
Lead
Domestic lead prices followed rising pace of LME lead prices on Monday, with offers quoted in the RMB 14,750-14,900/mt range. After experiencing lackluster trading sentiment over the past week, constant gains on Monday attracted some buying interest, improving market transactions. Deals of well-known branded goods were made at RMB 14,870/mt, and prices for lead from Yunnan rallied as well, trading at RMB 14,750/mt. Traded prices in domestic lead markets edged down to RMB 14,700/mt in the afternoon business due to falling LME lead prices, but actual transactions at the price level were limited, as it was not a mainstream trading period.

Zinc
SHFE 1010 zinc contract prices fluctuated lower after opening high at RMB 15,375/mt, and later slipped rapidly following strengthening US dollar at noon, with the drop expanding to RMB 170/mt. SHFE 1010 zinc contract prices finally ended at RMB 15,170/mt, and a large number of short positions entered the market, with positions of SHFE 1010 zinc contract increased by 12,600 lots. Total trading volumes were near 1.7 million lots, down significantly compared with last Friday’s 1.85 million lots, indicating market sentiment weakened and the wait-and-see sentiment emerged. Although speculative funds helped push up zinc prices previously, zinc prices still failed to hold steady at RMB 15,500/mt last week, so SMM predicts struggles between long and short positions will intensify amid this round of declines in zinc prices.
 
In the spot market, #0 zinc was mainly traded around RMB 15,150/mt in the morning in Shanghai, with spot discounts moving around RMB 120/mt against SHFE 1009 zinc contract prices, while #1 zinc was traded around RMB 15,100/mt. Downstream producers made purchases on the first trading day of this week when SHFE zinc prices were lower, and overall trading sentiment was general. However, spot trading volumes were very limited in the afternoon as SHFE zinc prices fell rapidly.

Tin
LME tin prices opened at USD 17,690/mt and closed at USD 17,750/mt last Friday, up USD 225/mt from a day earlier, with the highest price at USD 17,800/mt and the lowest price at USD 17,620/mt. Daily trading volumes were 120 lots and positions were 17,602 lots. LME nickel prices rallied along with other base metal prices last Friday, which is mainly attributed to improved confidence amid advances of global equity market. LME tin prices opened at USD 17,800/mt on Monday, and fell to test USD 17,635/mt due to slight rebound of the US dollar. Recent economic data were mixed, and ongoing uncertainties of macro economy outlook still haunted the market. Market sentiment was mixed, and LME tin prices will continue to fluctuate.
 
Major brand tin smelters still kept offers unchanged on Monday, and overall prices were largely stable in the Shanghai tin spot market. Some traders offered tin from Yunnan Tin group at RMB 138,500/mt earlier and lifted prices to RMB 138,800/mt later when LME tin prices advanced, but transactions were still sluggish. Purchasers were more likely to purchase lower-priced unknown brand tin, with traded prices of unknown brand tin between RMB 137,800-138,000/mt reported in the market. Unknown brand tin dominated market transactions, and only few volumes of major brand tin were traded between RMB 138,800-139,300/mt. Supply of goods was at low level. Although LME tin prices advanced to certain extent last week, domestic tin prices failed to match LME tin price gains. Downstream consumers mostly adopted a wait-and-see attitude amid seasonal low-demand period. It is expected that prices will largely remain stable this week.
 
Nickel
LME nickel prices opened at USD 19,375/mt and closed at USD 19,400/mt last Friday, up USD 25/mt from a day earlier, with the highest price at USD 19,545/mt and the lowest price at USD 19,175/mt. Daily trading volumes were 1,519 lots and positions were 88,787 lots. Inventories reduced by 666mt to 120,660mt. LME nickel prices opened at USD 19,430mt on Monday, reaching the highest at USD 19,430/mt and touching the lowest at USD 19,242/mt, with the latest at USD 19,300/mt, down USD 100/mt from a day earlier. China’s copper import data were lower-than-expected, dragging down base metal prices slightly down.
 
In the Shanghai nickel market, transactions were relatively sluggish on Monday. Traded prices of nickel from Jinchuan Group were between RMB 155,000-155,500/mt. Supply of nickel from Jinchuan Group was relatively ample and transactions were mainly done at low-end prices. Supply of imported nickel was few in the market, and traded prices were around RMB 153,500/mt, with few downstream consumers reported in the market. Most traders believe that nickel prices will remain stable in the future.

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

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