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SMM Daily Review - 2010/7/15 Base Metals Market
Jul 16,2010 10:28CST
smm insight

SHANGHAI, July 16 (SMM) –

SHFE copper market on Thursday opened lower. After China announced a series of positive economic data at 10:00 am, China’s domestic stock markets climbed higher, but later dropped all the way due to sell-offs after previously sharp increases. SHFE copper for October delivery copper prices opened at RMB 52,570/mt before reaching as low as RMB 52,440/mt. After 10:00 am, SHFE October delivery copper prices surged to RMB 53,520/mt, a gain of nearly RMB 1,000/mt. However, the most actively-traded copper prices later lost the stream, and shed all the way following sell-offs by shorts. In the afternoon session, SHFE October delivery copper prices were pressed below the daily moving average, and finally ended at RMB 52,870/mt, down RMB 110/mt. Positions and trading volumes both expanded for SHFE October delivery copper contract, with positions up 2,810 lots to 211,000 lots, and trading volumes up to 425,500 lots, a growth of 7% from a day earlier. The October delivery copper contract on the SHFE market is now supported at the 20-day moving average, and SMM believes the contract will continue to move in the RMB 52,500-53,500/mt in the short term.

According to China’s National Bureau of Statistics, China’s output of refined copper was 422 kt in June, up 6% on a monthly basis. Copper stocks in SHFE warehouses are expected to increase significantly in the week ended July 16th, and this will be negative on domestic copper prices, but it is in line with consumption expectations during a traditional low demand period in July.

Thursday is the last trading day for SHFE July delivery copper contract, but the price gap between SHFE July and August delivery copper contracts was still about RMB 400/mt. Cargo-holders made offers based on their conditions. In the morning business, the cash-to-current month contract was quoted at discounts of negative RMB 100-200/mt, and premium between cash and SHFE August delivery contract was heard at positive RMB 300/mt, with depressed sales, and market even reported premiums at positive RMB 800/mt between cash and SHFE October delivery copper contract. Traded prices were in the RMB 53,600-53,800/mt range. After 11:00 am, domestic high-quality copper was no longer offered at discounts, making buyers difficulties in making deals at discounts. As a result, domestic high-quality copper was offered at premiums, up from RMB 0/mt to positive RMB 20-50/mt. Later, suppliers of domestic standard-quality copper and imported goods stopped moving goods, while downstream producers made little purchases in view of mixed offers, hoping to purchase low-priced goods following the beginning of SHFE August delivery copper contract tomorrow, though spot premiums will return to positive RMB 100-250/mt. SMM believes that spot copper prices will continue to fluctuate between RMB 53,000-54,000/mt, despite of an uneven journey.

SHFE aluminum prices opened lower in the morning session, but later both China's stock markets and futures market moved higher in response to positive China's economic data released at 10:00 am, with SHFE aluminum prices advancing as well. SHFE 1010 aluminum contract prices inched up to RMB 14,965/mt, with strong resistance reported at RMB 15,000/mt. However, SHFE 1010 aluminum contract prices slipped later all the way, with prices breaking through the daily moving average in the afternoon, and finally prices ended at RMB 14,895/mt, down RMB 10/mt compared with the previous trading day. SHFE 1010 aluminum contract prices have closed with marginal gains, and technical indicators show an unclear market direction.
In the spot market, SHFE spot-month aluminum contract prices were firm, so cargo-holders held high interest in moving goods, with deals made at prices flat at SHFE spot-month aluminum contract prices. Downstream producers were willing to make purchases at lower prices, as they believe SHFE 1008 aluminum contract prices will be higher after transitioning into a new contract month. In this context, overall trading sentiment was moderate. Spot discounts may appear again on July 16th.      
Offers in the Shanghai market were mixed on Thursday, ranging from RMB 14,700/mt to RMB 14,950/mt. Trading sentiment remained low, and deals were mainly made in the RMB 14,750-14,850/mt range. Market acceptance towards low-priced goods from Yunnan was high. Domestic lead producers maintained prices firm, with offers heard at around RMB 15,000/mt in Henan province.

SHFE zinc prices rose rapidly in the morning session in response to better-than-expected macro economic data for 1H in China, but SHFE 1010 zinc contract prices slid continuously driven down by weak spot markets and falling stock markets, with the highest prices reported at RMB 15,285/mt, and finally prices closed at RMB 15,125/mt. Cargo-holders were eager to move goods on the last trading day of SHFE 1007 zinc contract, with spot discounts expanding as a result. Positions of SHFE 1010 zinc contract fell further by over 10,000 lots, while trading volumes reported 1.76 million lots, failing to hit the previous high level, indicating the divergence of views on market outlook was intensifying and most players adopted a wait-and-see attitude.
In the spot market, downstream producers were pessimistic toward zinc prices, as the rally in zinc prices was due mainly to positive economic data, so spot market sentiment was lukewarm. #0 zinc was mainly traded between RMB 15,000-15,050/mt in Shanghai, with spot discounts moving around RMB 250/mt against SHFE 1011 zinc contract prices, while #1 zinc was traded between RMB 14,950-15,000/mt. Market players are focused on the impact from China's economic data on LME zinc market.

LME tin prices opened at USD 17,920/mt on Wednesday and closed at USD 17,900/mt, up USD 30/mt from a day earlier, with highest price climbing to USD 18,100/mt and the lowest price touching USD 17,835/mt. Daily trading volumes were 169 lots and positions were 17,517 lots. LME tin inventories reduced by 45mt to 16160mt. LME tin prices slipped after a surge, as wait-and-see sentiment was growing from lower-than-expected US economic data. LME tin prices opened at USD 17,900/mt on Thursday, and climbed slightly to USD 18,000/mt. The economic data released by China on Thursday indicated that economic growth pace showered down, curbing upward momentum of base metal prices.
Prices from smelters remained stable in the Shanghai tin spot market, with current ex-works tin prices from major brand tin smelters standing above RMB 139,000/mt. Traded prices of tin were largely stable in the spot market, and supply of unknown brand tin was reducing. Tin from Yunnan tin group and Yunnan Gejiu Zili Metallurgy Co.,Ltd was traded between RMB 139,000-139,500/mt and traded prices of unknown brand tin were between RMB 138,000-138,500/mt. Supply of goods was still limited, and overall trading sentiment slightly improved, resulting in lukewarm transactions in the market. 
LME nickel prices opened at USD 19,500/mt and closed at USD 19,300/mt on Wednesday, down USD 176/mt from a day earlier, with the highest price at USD 19,825/mt and the lowest price at USD 19,300/mt. Daily trading volumes were 1,947 lots and positions were 89,286 lots. LME nickel inventories reduced by 168mt to 119796mt. LME nickel prices opened at USD 19,300/mt on Thursday, climbing to the highest level at USD 19,430/mt and touching the lowest level at USD 19,277/mt, with latest price at USD 19,285/mt, down USD 15/mt from a day earlier.
In the Shanghai nickel spot market, overall trading sentiment was moderate. Transactions were largely done between traders to replenish stocks, with few end-users entering the market. Traded prices of nickel from Jinchuan Group were between RMB 154,500-155,000/mt and traded prices of imported nickel were between RMB 153,000-153,500/mt.

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


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