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SMM Daily Review - 2010/7/22 Base Metals Market
Jul 23,2010 10:15CST
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SHANGHAI, July 23 (SMM) --
SHFE copper market on Wednesday opened high in a positive response to rising LME copper market. SHFE copper for October delivery copper contract opened at RMB 53,810/mt, and fell back after failing to test RMB 53,980/mt in the morning session. In the afternoon session, the most actively-traded copper contract moved narrowly around the 5-day moving average, down as low as RMB 53,600/mt. China A-share market hit a new high since July in the afternoon following strong performance of shares of Agricultural bank of China. In this context, SHFE October delivery copper contract closed at RMB 53,940/mt, up RMB 500/mt or 0.94%. Positions dropped moderately. Positions for SHFE October delivery copper contract were down 8,914 lots to more than 200,000 lots, and trading volumes were about 357,000 lots. SHFE copper market has hit the 60-day moving average, and with an upward momentum available on technical indicators. SMM believes that SHFE copper market will stand above the 60-day moving average on Friday, and break through the RMB 54,000/mt mark.

In the spot market, buying interest became more cautious after SHFE copper prices rose above RMB 54,000/mt. The SHFE/LME copper price ratio dropped slightly from a day earlier, but suppliers of imported goods remained eager to move goods. Hence, market supply was still dominated by imported copper, with premiums between positive RMB 100-180/mt. Domestic copper was negatively affected by imported copper, causing its premiums to drop. Premiums for "Guixi" brand copper tried to firm at positive RMB 250/mt, but pressure from imported copper nudged premiums down to positive RMB 200-220/mt. Deals were generally made in the RMB 54,150-54,350/mt for the day. Transactions dropped from earlier week, as continuing price gains resulted in cautious buying attitude. SMM believes that downstream producers will enter the market for purchases at RMB 54,000/mt, if the round of price gains withstands tests. Or else, downstream producers will continue to adopt a wait-and-see attitude with regard to purchasing during a traditional low demand period.

SHFE aluminum prices were weaker than LME aluminum prices, and SHFE 1010 aluminum contract prices opened flat at RMB 15,025/mt, and later climbed to RMB 15,070/mt when China's A-shares market was open, but later slipped to RMB 15,005/mt, with prices finally closing at RMB 15,045/mt, up RMB 20/mt, or up 0.13%. Total trading volumes were 61,288 lots, and positions increased by 24 lots to 232,070 lots. SHFE 1010 aluminum contract prices mainly moved in a narrow band. It seems that SHFE aluminum prices have stood steady at RMB 15,000/mt supported by other base metals, and any further increases in aluminum prices will still depend on other base metals.

Spot markets remained weak. Downstream fabricators were unwilling to make purchases at RMB 14,800/mt or above, while traders held sufficient goods, with high interest in selling goods, with mainstream traded prices falling significantly. 

Domestic lead prices on Thursday gained further after rallying above RMB 15,000/mt yesterday in response to rising LME lead prices. Transactions in the Shanghai market were done between RMB 15,100-15,200/mt. In face of advancing LME lead prices, traders became reluctant to move goods in the afternoon business. Domestic lead prices posted constant gains, but downstream buying interest hadn't been stimulated yet, leaving trading sentiment quiet on Thursday.

SHFE 1010 zinc contract prices mainly moved around RMB 15,565/mt, and finally closed at RMB 15,600/mt. Positions declined further, with positions of SHFE 1010 zinc contact dropping by 32,000 lots to 236,000 lots, but positions of SHFE 1011 zinc contract grew gradually. The price range of zinc moved higher continuously, but strong pressure was reported at the 60-day moving average.

In the spot market, #0 zinc was traded between RMB 15,350-15,400/mt in Shanghai, with spot discounts ranging between RMB 180-200/mt, while #1 zinc was traded between RMB 15,300-15,350/mt. Zinc prices faced strong resistance between RMB 15,600-15,800/mt, so higher zinc prices failed to boost spot market confidence. As a result, overall spot trading sentiment was bearish, and SMM predicts zinc prices will continue to fluctuate in a narrow band, with special focus on the impact on zinc prices from stock markets and LME zinc prices.       

LME tin prices opened at USD 18,075/mt on Wednesday and closed at USD 18,375/mt, up USD 300/mt from a day earlier, with highest price climbing to USD 18,499/mt and the lowest price touching USD 18,015/mt. Daily trading volumes were 295 lots and positions were 16,789 lots. LME tin inventories reduced by 145mt to 15,685mt. LME tin prices opened at USD 18,130/mt on Thursday, climbing to test USD 18,400/mt and touching the lowest at USD 18,050/mt, moving up slightly.

In the Shanghai tin spot market, low-end prices were lifted up stably. Mainstream traded prices of major brand tin were between RMB 139,000-140,000/mt and mainstream traded prices of unknown brand tin were around RMB 138,500/mt. Offers from smelters were unchanged and transactions remained lukewarm. Downstream purchasers were hesitant toward price increase and adopted a wait-and-see attitude, with overall lackluster trading sentiment reported in the market. 

LME nickel prices opened at USD 19,100/mt and closed at USD 19,477/mt on Wednesday, up USD 387/mt from a day earlier, with the highest price at USD 19,575/mt and the lowest price at USD 19,100/mt. Daily trading volumes were 1,709 lots and positions were 84,937 lots. LME nickel inventories reduced by 444mt to 117,762mt. LME nickel prices opened at USD 19,400/mt on Thursday, climbing to the highest level at USD 19,793/mt and touching the lowest level at USD 19,330/mt, with latest price at USD 19,711/mt, up USD 248/mt from a day earlier. LME metal prices strengthened from positive economic data from the EU zone and a weak performance of US dollar.

In the Shanghai nickel spot market, overall trading sentiment was relatively brisk, with traders and end-users both entering the market to replenish stocks. Mainstream traded prices of nickel from Jinchuan Group were around RMB 155,500/mt and traded prices of imported nickel were around RMB 154,000/mt.     


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