SMM Daily Review - 2010/7/19 Base Metals Market

SHANGHAI, July 20 (SMM) --
Copper:
On Monday, SHFE copper market tracked LME copper price trends, with prices moving downward after a low open. China's A-share market posed increases in positions and trading volumes, up 2%, but SHFE copper market failed to make positive response to this. Although edging up in the afternoon, SHFE copper market only struggled to narrow losses. The October delivery copper contract on the SHFE market moved narrowly above the daily moving average after opening low at RMB 51,910/mt, reaching as high as RMB 52,450/mt. Finally, the most actively-traded copper contract closed at RMB 52,320/mt, a loss of RMB 640/mt, or down 1.21%. Positions for SHFE October delivery copper contract were up 6,004 lots to more than 215,000 lots, and trading volumes fell to around 387,000 lots. Due to lack of speculative funds, SHFE copper market came under great pressure at the 30-day moving average on Monday.

Domestic spot copper markets represented weak performance. Although SHFE copper market has been away from the previous fluctuating range after declines, the previous support level has now become the resistance level. However, bargain hunters didn't enter the market as expected. Spot premiums rose from positive RMB 200-300/mt to positive RMB 250-350/mt, with deals made between RMB 52,950-53,100/mt in the morning business. Transactions were weak in the afternoon, and spot premiums fell following rising SHFE copper prices, helping traded prices increase to RMB 53,000-53,150/mt. Supply of domestic high-quality copper fell as marked declines in traded prices have significantly reduced selling interest. Market supply was still dominated by imported copper, and mainly low-end imported copper. The SHFE/LME copper price ratio moved narrowly at 8.0 on Monday, and cargo-holders were eager to move goods for cash generation due to lack of confidence towards outlook. However, transactions were not smooth, and buying interest was easily affected by premiums, leaving spot premiums in the positive RMB 200-250/mt range. Downstream producers generally intended to buy goods in the RMB 50,000-52,000/mt range, and even lower. In face of prices at RMB 53,000/mt, and unclear price direction, most buyers preferred to stand on the sidelines.

Aluminum:
LME aluminum prices dived last Friday after failing to move higher negatively affected by plummeting US stocks, and SHFE aluminum prices opened lower on Monday in response. SHFE 1010 aluminum contract prices opened at RMB 14,880/mt, and later dipped to RMB 14,860/mt. China's A-shares market strengthened unexpectedly due to positive remarks by Chinese government officials, boosting overall financial market sentiment. As a result, SHFE aluminum prices climbed to RMB 14,965/mt in the afternoon, with strong resistance reported at the RMB 15,000/mt mark. SHFE 1010 aluminum contract prices slipped to RMB 14,910/mt at the closing due to the withdrawal of long positions. Total trading volumes were 59,626 lots, and positions dropped by 4,698 lots to 230,682 lots, and special focus should be put on whether or not SHFE 1010 aluminum contract prices can stand steady at the 5-day moving average.

A number of traders said downstream demand weakened sharply recently, and fewer orders received by aluminum fabricators also dampened buying interest. Although spot discounts narrowed slightly, downstream consumers stood on the sidelines, with overall trading sentiment lackluster. Steady declines in domestic spot stocks recently helped support aluminum prices, with any declines in aluminum prices expected to be limited in the short term. SMM predicts aluminum prices will move narrowly in the short term, but aluminum price trends will not be optimistic in the medium term with the approach of seasonal low demand period. 

Lead:
Domestic lead prices were flat on Monday due to unclear direction from LME lead market. Domestic lead producers kept prices firm, and with limited supply. Well-known branded goods were quoted in the RMB 14,900-14,950/mt range, and prices for lead from Yunnan were stable at around RMB 14,800/mt, with no intention to reduce prices. Despite of inquires from downstream producers, actual transactions were limited. SMM believes supply in domestic lead markets will remain tight in the short term in view of flood in south China, and production suspension at producers due to pollution, and so prices will be steadily firm.

Zinc:
SHFE 1010 zinc contract prices moved narrowly around RMB 15,000/mt. SHFE 1010 zinc contract prices climbed all the way after opening lower at RMB 15,010/mt led by China's stock markets, and finally closed at RMB 15,160/mt. Trading volumes of SHFE 1010 zinc contract dropped by nearly 340,000 lots to 1.34 million lots compared with last Friday levels. Positions of SHFE 1010 zinc contract increased by 33,000 lots before 2:00 pm, but a large number of short players closed positions before closing, with positions of SHFE 1010 zinc contract only rising by 6,692 lots to 287,000 lots finally, an indication of a lack of clear market direction. Most market players believe SHFE 1010 zinc contract prices will fluctuate narrowly between RMB 14,800-15,200/mt in the short term, so the wait-and-see sentiment is strong currently.

In the spot market, #0 zinc was mainly traded between RMB 14,980-15,020/mt in Shanghai. Spot zinc prices mainly moved above RMB 15,000/mt in the afternoon following rising SHFE zinc prices, but actual purchases were limited. At present, actual downstream demand will unlikely provide strong upward momentum for zinc prices, so special attention should be paid to the impact from SHFE copper prices and China's A-shares market trends on SHFE zinc prices.   

Tin:
LME tin prices opened at USD 18,100/mt and closed at USD 17,600/mt last Friday, down USD 375/mt from a day earlier, with the highest price at USD 18,100/mt and the lowest price at USD 17,500/mt. Daily trading volumes were 154 lots and positions were 17,370 lots. LME tin inventories reduced by 115mt to 16,035mt. LME tin prices closed with losses last Friday after being dragged down by falling US stocks and re-kindled concern over the economic recovery. LME tin prices opened at USD 17,750/mt on Monday, and climbed to test USD 17,950/mt in the afternoon session. Moody cut Ireland's credit rating from Aa1 to Aa2, but the news failed to exert great impact on the market, indicating stable market sentiment towards the EU debt crisis.

In the Shanghai tin spot market, prices were largely stable on Monday, with traded prices of tin from Yunnan Tin group between RMB 139,000-139,500/mt and traded prices of unknown brand tin between RMB 138,000-138,500/mt. The decline of LME tin prices last Friday had failed to drag down domestic spot tin prices, and market sentiment was relatively stable. Smelters were not willing to lower offers due to high raw material prices and showed reluctance to move goods, with quotes from smelters unchanged from a day earlier and quotes from unknown brand tin smelters also firm. However, demand was not strong amid the seasonal low-demand period. In addition, any upward momentum for prices to move up was also limited due to a lack of support from LME tin prices. In this context, most market players believed that spot tin prices will remain stable this week.

Nickel:
LME nickel prices opened at USD 19,499/mt and closed at USD 18,940/mt last Friday, down USD 434/mt from a day earlier, with the highest price at USD 19,499/mt and the lowest price at USD 18,875/mt. Daily trading volumes were 1,963 lots and positions were 88,971 lots. Inventories reduced by 492mt to 11,9070mt. LME nickel prices opened at USD 19,200mt on Monday, reaching the highest at USD 19,200/mt and touching the lowest at USD 19,000/mt, with the latest at USD 19,100/mt, up USD 160/mt from a day earlier. 

In the Shanghai nickel market, overall trading sentiment was soft on Monday. Supply of low-priced goods was limited in the market, but wait-and-see sentiment was relatively strong in the market as narrow price fluctuation erased traders' profit. Traded prices of nickel from Jinchuan Group were between RMB 154,500-155,500/mt and transactions were sparse for imported nickel.     

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