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SMM Daily Review - 2010/7/29 Base Metals Market
Jul 30,2010 10:05CST
data analysis

SHANGHAI, July 30 (SMM) --


On Thursday, SHFE copper market fell back after failing to test higher from a high open. SHFE copper for November delivery contract opened at RMB 56,100/mt, and moved lower after briefly reaching RMB 56,490/mt, down as low as RMB 55,840/mt. Supported by rising China A-share market, the November contract closed at RMB 56,260/mt, up RMB 590/mt, or 1% from the previous trading day. Positions for SHFE November delivery copper contract were up 11,598 lots, and trading volumes increased to more than 450,000 lots. SMM believes that an upward momentum is still available on the SHFE copper market.

In the spot market, discounts appeared as SHFE copper prices jumped. Spot discounts for high-quality copper were around negative RMB 30/mt. "Guixi" brand copper was offered at discounts at RMB 0/mt after failure to quote price at premiums of positive RMB 20/mt along with pressure from a large number of imported copper with discounts at negative RMB 100-200/mt. Transactions were made in the RMB 56,000-56,300/mt range in the morning business, and traded prices rallied to RMB 56,100-56,400/mt in the afternoon. Buying interest for high-quality copper was strong, as discounts for those high-quality goods will gradually disappear following the delivery date. The SHFE/LME copper price ratio fell to 7.8, leaving losses for imports at around RMB 2,000/mt, but supply of imported goods didn't reduce, a sign of strong selling interest among suppliers for cash generation, which will drag down copper price gains. At present, downstream producers hesitates about purchasing. If LME copper prices will continue to gain, and reach to the price band between USD 7,200-7,500/mt, the existing price of RMB 56,000/mt will be acceptable to them, and spot copper prices will likely advance to RMB 58,000-60,000/mt. However, some downstream producers refused to accept the current price in view of declines in orders and operating rates over the week, hoping prices could drop to RMB 53,000/mt. SMM believes that copper prices will experience corrections, but should not be too short amid a bullish trend.


SHFE aluminum prices opened higher, but faced resistance on the upward track. SHFE 1010 aluminum contract prices opened at RMB 15,440/mt, and fell back to low levels after climbing to RMB 15,510/mt, with prices dipping to RMB 15,345/mt and finally ending at RMB 15,385/mt. Both SHFE copper and zinc prices closed with gains, but SHFE aluminum prices closed with declines, down RMB 25/mt, or down 0.16%. Trading volumes remained unchanged, but positions grew slightly. SHFE 1010 aluminum contract prices received support at the 5-day moving average, but faced strong resistance at RMB 15,500/mt. Aluminum prices underwent corrections on the upward track due to weak market fundamentals despite of bullish other base metals prices.

Spot aluminum prices extended gains, and downstream fabricators who adopted a wait-and-see attitude previously accepted high prices reluctantly, with inquiries up significantly. Traders were unwilling to move goods, resulting in tight market supply. Mainstream traded prices advanced slightly, and overall market sentiment improved slightly compared with the first half of the week.

SHFE 1010 aluminum contract prices moved higher driven up by the 5-day moving average, and are expected to climb further amid positive technical indicators and bullish other base metals prices, but the pressure at the RMB 15,500/mt mark is relatively strong, and the superficial improvement in market fundamentals can not give substantial upward momentum to aluminum prices. In this context, SMM predicts aluminum prices will continue to fluctuate in a narrow band, with prices expected to pick up slightly and be weaker than other base metals.     


Domestic lead prices approached RMB 16,000/mt. Currently, mixed views expanded on existing prices in the market. Some producers believed that any rising room will be limited, and made preparations for selling goods, while optimistic producers continued to keep prices firm at RMB 16,000/mt. Downstream producers were still not eager in purchases due to rapid price rallies. Transactions were done in the RMB 15,750-15,850/mt range in the Shanghai market, with select deals at RMB 15,900/mt.


SHFE 1011 zinc contract prices mainly moved around RMB 16,300/mt after opening at RMB 16,310/mt, and SHFE zinc market remained bullish, with trading volumes reaching 1.76 million lots. SHFE 1011 zinc contract prices finally closed at RMB 16,360/mt, up 0.99%. SHFE 1011 zinc contract prices succeeded in standing above all moving averages, but positions fell by 3,528 lots to 340,000 lots, ending the several days of growth. Although zinc prices were stronger, nearly 15 consecutive days of gains in zinc prices spurred investors' wait-and-see sentiment.

Spot market sentiment remained neutral. #0 zinc was mainly traded between RMB 15,900-15,950/mt in Shanghai, and few downstream producers could accept zinc prices around RMB 16,000/mt. #1 zinc was traded around RMB 15,900/mt, and market supplies remained limited. Zinc prices show signs of rising strongly in the short term led by copper prices, and spot zinc prices are expected to head for RMB 16,500/mt after gradually standing above RMB 16,000/mt.


LME tin prices opened at USD 19,495/mt on Wednesday and closed at USD 19,500/mt, up USD 100/mt from a day earlier, with highest price climbing to USD 19,600/mt and the lowest price touching USD 19,325/mt. Daily trading volumes were 166 lots and positions were 17,465 lots. LME tin inventories increased by 5mt to 15,155mt. The optimistic statement on China's economic growth prospect helped lend upward momentum for the market. On Thursdays, LME tin prices opened at USD 19,499/mt and reached the highest at USD 19,575/mt. The US dollar index fell below 82, which helped lend support for base metal prices.

In the Shanghai tin spot market, transactions were more sluggish from a day earlier due to steady tin price hike. Some smelters lowered offers slightly, but transactions were still not improved. Mainstream traded prices also slipped, with major brand tin being traded between RMB 145,500-146,000/mt and unknown brand tin being traded between RMB 144,500-145,300/mt. Domestic tin prices have been pushed up dramatically this week, but any upward momentum for domestic tin prices is weak as wait-and-see sentiment emerged again when LME tin prices fluctuated.


LME nickel prices opened at USD 20,500/mt and closed at USD 20,450/mt on Wednesday, down USD 80/mt from a day earlier, with the highest price at USD 20,945/mt and the lowest price at USD 20,370/mt. Daily trading volumes were 1,957 lots and positions were 88,092 lots. LME nickel inventories reduced by 384mt to 116,334mt. LME nickel prices closed with slight losses due to impact from lower-than-expected economic data. LME nickel prices opened at USD 20,460/mt on Thursday, climbing to the highest level at USD 20,560/mt and touching the lowest level at USD 20,350/mt, with latest price at USD 20,420/mt, down USD 30/mt from a day earlier. Durable goods order unexpectedly slipped and the US Federal Reserve's pessimistic estimation on economic prospect further weighed on market sentiment, leading to slight decline of LME nickel prices.

In the Shanghai nickel spot market, overall trading volumes were small from a day earlier, and nickel prices were temporarily stable. Mainstream traded prices of nickel from Jinchuan Group were between RMB 160,000-160,500/mt, and nickel from Russia was traded at USD 159,500/mt. Traders were cautiously optimistic towards future market outlook.

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