SMM Daily Review - 2010/7/23 Base Metals Market

 SHANGHAI, July 26 (SMM) --

Copper

SHFE copper market on Friday advanced further after a high open. SHFE copper for October delivery opened at RMB 54,800/mt, and reached as high as RMB 55,490/mt in the morning session due to a steady China A-share market before closing at RMB 55,400/mt, up RMB 1,630/mt, or 3.03%. Positions for SHFE October delivery copper contract were down 17,720 lots to 183,000 lots due to risk aversion over the weekend, while trading volumes increased mildly to more than 360,000 lots. At present, sentiment in neighboring markets, including LME copper market, and China A-share market, has improved. In addition, an upward momentum is available on technical analysis. In this context, SMM expects SHFE copper price will test RMB 56,000/mt in the coming week.

In the spot market, supply of imported copper fell as the SHFE/LME copper price ratio dropped to 7.9, resulting from SHFE current-month copper contract’s failure to test RMB 55,500/mt after standing above RMB 55,000/mt. Hence, market supply was dominated by domestic copper, but downstream producers were wary of purchases in view of constant price rallies. In this context, suppliers were forced to reduce premiums, with offers reported at positive RMB 60-80/mt for high-quality copper, down from morning levels of positive RMB 120/mt; premiums for standard-quality copper were down from positive 50/mt to RMB 0/mt, and a limited number of hydro-copper were quoted at discounts of negative RMB 50/mt. Speculators and traders were active in the market for the day.

According to data tallied by Shanghai Futures Exchange, copper stocks were down 6,316 mt in the weed ended July 23rd, and steady declines in copper inventories during the current low demand period suggested strong buying interest in China. At present, LME copper market is stronger than SHFE copper market, leaving a further upward room for domestic copper prices.

Aluminum

SHFE 1010 aluminum contract prices opened up over RMB 100/mt at RMB 15,155/mt on July 23rd, stimulated by LME aluminum prices. SHFE 1010 aluminum contract prices remained neutral in the morning session when other base metals prices fluctuated widely, with prices mainly moving in a narrow band and hitting a low of RMB 15,130/mt, but later SHFE 1010 aluminum contract prices rebounded strongly at the closing, with prices soaring to a high of RMB 15,330/mt, and finally pared some losses and closed at RMB 15,275/mt, up RMB 240/mt compared with the previous trading day, or up 1.6%. Transactions improved significantly, with total trading volumes reported at 116,738 lots, and positions surged by 10,802 lots to 242,872 lots. SHFE 1010 aluminum contract prices tracked LME aluminum price trends and stood above the 60-day moving average, but will face strong pressure if prices rise further.

Spot aluminum prices rose at a slower pace compared with SHFE aluminum prices, and downstream acceptance of current aluminum prices was limited. Spot discounts expanded sharply in the afternoon, stimulating speculative buying, and spot prices moved higher to above RMB 15,000/mt in south China after SHFE aluminum prices climbed to RMB 15,300/mt, with overall market sentiment reported general. Spot aluminum prices faced growing pressure when approaching RMB 15,000/mt, and downstream producers were skeptical about the stability of aluminum prices above RMB 15,000/mt, so they chose to stand on the sidelines, with deals mainly made by speculative traders. 

Lead

The high-end of domestic lead prices approached RMB 15,500/mt following producer optimistic outlook, and domestic lead producers remained reluctant to move goods. However, downstream producers were on the sidelines in view of continuous price gains. Traders said buying interest would improve in the coming week, if prices move higher. Transactions in the Shanghai market were made in the RMB 15,250-15,400/mt range.

Zinc

SHFE 1010 zinc contract prices moved narrowly around RMB 15,800/mt after opening higher on July 23rd, and later moved higher at the closing supported by the fact that a large number of short players closed positions, and finally prices ended at RMB 15,885/mt, with the highest prices reported at RMB 15,915/mt, hitting an 8-week high. Positions of SHFE 1010 zinc contract declined by nearly 40,000 lots to 197,000 lots, and SHFE 1011 zinc contract is expected to become the most active contract next week (July 26-30). SHFE zinc prices jumped to the 60-day moving average on July 23rd, and most market players stayed out of the market.

In the spot market, #0 zinc was traded between RMB 15,550-15,600/mt in Shanghai, with spot discounts moving around RMB 200/mt against SHFE 1010 zinc contract prices, while #1 zinc was traded between RMB 15,500-15,550/mt. Spot trading sentiment was general, and soaring SHFE zinc prices depressed downstream buying interest. SHFE zinc prices climbed at noon, and spot trading volumes were limited. Special focus should be put on whether or not SHFE 1010 zinc contract prices can break through the RMB 16,000/mt mark in the near term.

Tin

LME tin prices opened at USD 18,130/mt and closed at USD 18,550/mt last Thursday, up USD 175/mt from a day earlier, with highest price at USD 18,600/mt, and the lowest price at USD 18,050/mt. Daily trading volumes were 384lots and positions were 16,932 lots. LME tin inventories reduced by 150mt to 15,535mt.  LME tin prices rallied significantly along with other base metals last Thursday from fund buying and short-covering. LME tin prices opened at USD 18,550/mt last Friday, reaching the highest at USD 18,800/mt and touching the lowest at USD 18,350/mt, with prices continuing upward momentum.

Smelters lifted offers, with quotes from major brand tin smelters above RMB 139,500/mt and offers of tin from Yunnan Tin group at as high as RMB 144,000/mt. In the Shanghai tin spot market, mainstream prices were lifted up slightly. Supply of unknown brand tin was limited and major brand tin dominated market transaction. Traded prices of tin from Yunnan tin group were around RMB 141,000/mt, with limited transactions reported, and traded prices of tin from Yunnan Gejiu Zili Metallurgy Co., Ltd were between RMB 139,500-139,800/mt. Traded prices of unknown brand tin were around RMB 139,200/mt. Price hike failed to boost downstream purchasing sentiment, and transactions were still lackluster.  

Nickel

LME nickel prices opened at USD 19,400/mt and closed at USD 20,205/mt last Thursday, up USD 728/mt from a day earlier, with the highest price at USD 20,251/mt and the lowest price at USD 19,330/mt. Daily trading volumes were 3,337 lots and positions were 85,809lots. Inventories reduced by 234mt to 119,562mt. LME nickel prices continued to open higher last Friday. Although economic prospect is still not optimistic, market confidence is boosted to certain extent from PMI in the euro zone and premier Wen jiabao's speech. LME nickel prices rallied all the way to previous high at USD 20,600/mt and hover around the 60-day moving average at present.

Jinchuan Group lifted ex-works nickel prices by RMB 3,000/mt to RMB 156,000/mt, with prices breaking through previous price band between RMB 153,000-155,000/mt. Traders lifted offers due to limited supply, with traded prices of nickel from Jinchuan Group between RMB 158,500-159,000/mt and traded prices of unknown brand nickel between RMB 157,000-157,500/mt. Transactions increased in the afternoon trading session last Friday due to LME nickel price increase, and purchases from downstream consumers and traders were brisk due to expectation of price increase in the future, but still met resistance at RMB 160,000/mt. 

 
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