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SMM Daily Review - 2010/7/28 Base Metals Market
Jul 29,2010 10:36CST
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SHANGHAI, July 29 (SMM) --


SHFE copper market on Wednesday was closely related to China A-share market, which closed up 2.26% at 2,633 points after reaching 2,600 points for the first time since May 28th. Supported by strong performance on China’s stock markets, SHFE copper market advanced after low open. SHFE copper for November delivery has become the most actively-traded copper contract, and climbed higher after opening at RMB 54,950/mt. In the afternoon session, SFHE November delivery copper contract gained to RMB 56,360/mt due to support from domestic stock markets before ending at RMB 56,250/mt, up RMB 830/mt, or 1.5%. Positions for SHFE November delivery copper contract were up 30,668 lots to 165,472 lots, and trading volumes increased to 417,508 lots, and with turnover rate at 250%. Positions for SHFE October delivery copper contract were down 15,260 lots. Positive closing on the SHFE copper market on Thursday consolidated its support at the 5-day moving average, and an upward momentum is still available. SMM believes prices will advance further after experiencing short-term corrections.

In the spot market, trading sentiment remained low in the morning business, despite of higher prices on the SHFE copper market. The SHFE/LME copper price ratio dropped to 7.8. Despite of larger losses from the lower ratio, suppliers with previously-imported goods were still eager to move goods at high prices, leaving no reductions in market supply. However, downstream producers generally showed no intention to purchase goods due to risks concerns, resulting in spot discounts. Discounts and premiums were in the negative RMB 70/mt to positive 30/mt in the morning business, and traded prices rose to around RMB 55,700/mt from RMB 55,450/mt. Although spot discounts and premiums were between negative RMB 200 to positive RMB 50/mt, traded prices climbed above RMB 56,000/mt in the afternoon trade, reaching as high as RMB 56,250/mt. Some optimistic cargo-holders became unwilling to move goods, and some downstream producers entered the market for purchases in view of steadily rising prices. As the month-end approaches, buyers will be negatively affected by cash flow, but this will not disturb the rising trend of spot prices, if spot discounts expand further.


SHFE aluminum prices opened lower but moved higher yesterday, and SHFE 1010 aluminum contract prices opened at RMB 15,285/mt, but later dipped slightly to RMB 15,280/mt. The upward momentum in SHFE aluminum prices was weaker in the morning session, but later the climbing China's A-share markets helped push up SHFE 1010 aluminum contract prices to RMB 15,505/mt. SHFE 1010 aluminum contract prices received resistance at higher levels, and long positions exited from the market after profit-taking at the closing, with SHFE 1010 aluminum contract prices closing at RMB 15,480/mt, up RMB 135/mt, or up 0.88%. Trading volumes shrank, but total positions increased by 4,602 lots. SHFE 1010 aluminum contract prices consolidated at the support level of 60-day moving average. Base metals prices strengthened led by copper prices, showing evident signs of rising further in the short term. Aluminum prices are expected to increase at a slower pace amid weak market fundamentals, with special focus on changes of macro economic conditions and other base metals in the future. 


Market doubts about the sustainability of rising domestic lead prices strengthened on Wednesday following a drop on the LME lead market. However, domestic lead producers maintained prices firm. As LME lead prices pared its losses in the afternoon business, traders sentiment was improved, and started controlling on sales volumes, leaving prices firm. Traded prices in the Shanghai market were done between RMB 15,650-15,800/mt. Tecently, traders said trading sentiment turned low following higher prices, and SMM believes any improvements in transactions will depend on recovery in downstream demand, and on whether or not prices will make substantial breakthroughs.


SHFE zinc prices moved higher all the way led by China's stock markets after opening lower, showing strong performance. SHFE 1011 zinc contract prices picked up rapidly from 10:40 am, and finally closed at RMB 16,330/mt, up 1.4%, with the highest prices reported at RMB 16,375/mt. Positions jumped by 58,000 lots to 344,000 lots, while trading volumes reached 1.58 million lots, hitting a two-week high. SHFE 1011 zinc contract prices are consolidating around the RMB 16,000/mt mark, but downstream producers mainly adopted a wait-and-see attitude.

In the spot market, #0 zinc was mainly traded between RMB 15,850-15,900/mt in Shanghai, with offers climbing to RMB 16,000/mt at noon, but trading volumes were limited. #1 zinc was traded around RMB 15,800/mt. Technical indicators show clear signs of rising in zinc prices in the short term, but any corrections in zinc prices will be inevitable on their upward track.


LME tin prices opened at USD 19,700/mt and closed at USD 19,400/mt on Tuesday, down USD 51/mt from a day earlier, with highest price climbing to USD 19,800/mt and the lowest price touching USD 19,320/mt. Trading volumes were 277 lots and positions were 17,407 lots. LME tin inventories reduced by 220mt to 15,150mt. LME tin prices slipped with other base metal from weak economic data from the US. On Wednesday, LME tin prices opened at USD 19,495/mt, reaching the highest at USD 19,575/mt and touching the lowest at USD 19,490/mt, with prices fluctuating narrowly. Close attention should be paid to second quarter GDP results on Friday.

In the Shanghai tin spot market, mainstream prices continued to climb despite of the fact LME tin prices ended with losses. Prices of major brand tin were between RMB 147,000-148,000/mt, and prices of unknown brand tin were between RMB 145,500-146,500/mt. Overall trading sentiment was moderate. Downstream purchasers remained cautiously towards high-priced goods and preferred to purchase unknown brand tin. Monday's brisk trading sentiment from LME tin price hike become quiet on Wednesday, and downstream companies began to adopt a wait-and-see attitude again, with lackluster trading sentiment reported in the market.


LME nickel prices opened at USD 20,701/mt and closed at USD 20,530/mt on Tuesday, down USD 245/mt from a day earlier, with the highest price at USD 20,975/mt and the lowest price at USD 20,325/mt. Daily trading volumes were 2,524 lots and positions were 87,012 lots. LME nickel inventories reduced by 312mt to 115,950mt. LME nickel prices slipped with other base metal from weak economic data from the US. On Wednesday, LME nickel prices advanced on rally of China's A share stock market. LME nickel prices opened at USD 20,500/mt, reaching the highest at USD 20,945/mt and touching the lowest at USD 20,450/mt, with the latest at USD 20,770/mt, up USD 125/mt.

In the Shanghai nickel spot market, overall trading sentiment was stable. Downstream purchases accounted for 30% of total trading volumes. Mainstream traded prices of nickel from Jinchuan Group were around RMB 160,500/mt and mainstream traded prices of imported nickel were around RMB 159,500/mt, with limited trading volumes reported. Jinchuan Group lifted ex-works prices on Tuesday, which helped support nickel spot prices, but traders still remained cautiously towards future outlook.


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