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SMM Daily Review - 2010/8/13 Copper Market
Aug 16, 2010 10:18CST

SHANGHAI, Aug. 16 (SMM) –

Supported by LME copper market overnight, SHFE copper market opened high on Friday, and dropped at first, then rallied during the trading day. SHFE copper for November delivery fluctuated by RMB 100/mt in the morning session after opening at RMB 56,650/mt. In the afternoon session, SHFE copper market climbed after China A-share market returned 2,600 points. SHFE November delivery copper contract broke through RMB 57,000/mt, reaching as high as RMB 57,360/mt before closing at RMB 57,330/mt, up RMB 1,020/mt, or a gain of 1.81%. Trading sentiment was quiet in the afternoon session, and long sentiment was boosted in the afternoon, with significant increases in positions. Positions for SHFE November delivery copper contract was up 7,044 lots, to stabilize at around 203,000 lots. Trading volumes were 307,600 lots as trading sentiment dropped during the weekend, and with turnover rate of 151%. Although SHFE November delivery copper contract is still under pressure from the 10-day moving average, technical indicators show a sign of bottom out.

Spot market sentiment was improved after SHFE copper market stopped falling, and rebounded. Market supply reduced, as the SHFE/LME copper price ratio remains low despite of closer delivery date, and as rallying SHFE copper market hampered sales of goods hedging a forward-month contract, with tight supply. Hence, cargo-holders kept prices firm. In the morning business, high-quality copper was traded at RMB 56,700-56,750/mt. After SHFE copper market fell, spot premiums for high-quality copper rose to positive RMB 50/mt, and standard-quality copper at negative RMB 50/mt, dealing in the RMB 56,600-56,700/mt. Spot discounts for limited low-end imported copper were at around negative RMB 100/mt, with transactions made between RMB 56,500-56,600/mt. Downstream producers made brisk inquiries, with improved buying interest, and trading volumes increased significantly. SHFE copper prices climbed strongly in the afternoon, and long sentiment returned to the market.

The data tallied by Shanghai Futures Exchange showed that copper inventories increased by 7,500 lots, while increasing volumes of goods earmarked for deliveries in total inventories should be excluded. As market players expected copper prices to stabilize with a sign of rising in the coming week, spot prices in the afternoon business returned to above RMB 57,000/mt, with traded prices rising from RMB 57,000 to RMB 57,450/mt. Trading sentiment remained strong, helping transactions keep brisk for the whole day. Next Monday will be the last trading day for SHFE August delivery copper contract, with spot premiums expected between positive RMB 50~100/mt. 

SHFE 1011 aluminum contract prices opened slightly higher at RMB 15,390/mt driven up by LME aluminum prices, and then fluctuated higher gradually in the morning session. China’s A-shares rebounded strongly to 2,600 points, boosting base metals markets, and SHFE 1011 aluminum contract prices climbed to RMB 15,550/mt, and finally closed at RMB 15,535/mt, hitting the 20-day moving average, up RMB 190/mt compared with the previous trading day, or up over 1%. Trading sentiment was weak, and positions declined slightly by 1,386 lots.
Although SHFE aluminum prices advanced in the morning session, and spot aluminum prices increased as well, buyers in east China chose to stand on the sidelines when aluminum prices fluctuated between RMB 15,110-15,140/mt. However, the strong performance of SHFE aluminum prices in the afternoon spurred trader sentiment, and downstream fabricators also increased purchases, with trading sentiment relatively bullish. A stream of negative macro economic data previously has triggered market concerns over the pace of economic recovery. Although aluminum prices remain on an upward track, market players are still waiting for additional positive news to support aluminum prices, and aluminum prices will likely fluctuate in a narrow band.   

Domestic lead market was continuing to absorb negative impact from price declines on the LME lead market overnight, leaving no significant improvement in spot lead prices. However, downstream purchasing interest improved along with rallying LME lead prices, as evidenced by traders report that trading sentiment improved from the previous two trading days. Transactions in the Shanghai market was made between RMB 15,900-16,150/mt. Time is still needed for domestic lead prices to confirm its support at RMB 16,000/mt.

SHFE 1012 zinc contract has become the most actively-traded contract on August 13th, and SHFE 1012 zinc contract prices mainly fluctuated between RMB 16,850-17,000/mt narrowly in the morning session, and picked up rapidly later supported by rebounding China’s A-share markets. SHFE 1012 zinc contract prices continued to move higher in the afternoon, and finally closed at RMB 17,255/mt. Positions increased by nearly 40,000 lots from a day earlier, with long positions growing significantly.
In the spot market, #0 zinc was traded around RMB 16,500/mt in the morning session, with spot discounts moving around RMB 350/mt against SHFE 1011 zinc contract prices, while #1 zinc was traded around RMB 16,450/mt, with spot transactions general. Downstream buying interest was up following strengthening SHFE zinc prices in the afternoon, and #0 zinc was traded around RMB 16,600/mt, and spot transactions were bullish as a result. However, a portion of traders were unwilling to move goods, resulting in limited overall trading volumes. In addition, market supply of #1 zinc was relatively insufficient, with trading volumes limited as well.

LME tin prices opened at USD 19,951/mt and closed at USD 20,450/mt last Thursday, up USD 400/mt from a day earlier, with highest price at USD 20,500/mt, and the lowest price at USD 19,750/mt. Daily trading volumes were 288 lots and positions were 17,520 lots. LME tin inventories were down by 250 mt to 14,135 mt. On Friday, LME tin prices opened at USD 20,500/mt and tested the highest at USD 20,700/mt, climbing up slightly. Close attention should be paid to the US economic data to be released on Friday night.
In the Shanghai tin spot market, spot tin prices were up by USD 400/mt along with LME tin price increases, giving a dose of confidence to players. Market sentiment improved to certain extent, but transactions were still sluggish. Traded prices of major brand tin were between RMB 149,000-151,000/mt and traded prices of unknown brand tin were between RMB 146,000-148,000/mt. 

LME nickel prices opened at USD 21,500/mt and closed at USD 21,475/mt last Thursday, down USD 130/mt from a day earlier, with the highest price at USD 21,622/mt and the lowest price at USD 21,100/mt. Daily trading volumes were 1,985 lots and positions were 94,821 lots. Inventories were up by 396 mt to 116,694 mt. On Friday, LME nickel prices opened at USD 21,425/mt, reaching the highest at USD 21,868/mt and touching the lowest at USD 21,360/mt, with the latest at USD 21,725/mt, up USD 250/mt from a day earlier. Market is waiting for directions from economic data. The US would release a series of economic data last Friday, including retail sales, consumer confidence index and consumer price index.
In the Shanghai nickel spot market, overall trading sentiment was moderate last Friday. A weak open of LME nickel prices cast a shadow on spot transactions, and trading sentiment only improved slightly when LME nickel prices advanced at noon. Nickel from Jinchuan Group dominated market transaction with traded prices between RMB 165,300-165,500/mt, and nickel from Russia was traded around RMB 164,500/mt. Market sentiment became bullish amid rising LME nickel prices, and transactions were mainly done between traders. Cargo-holders showed unwillingness to move goods for the expectation of high prices in the future, given the support from Jinchuan Group’s ex-works nickel prices.


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