SMM Daily Review - 2010/8/17 Base Metals Market

SHANGHAI, Aug. 18 (SMM) –

Copper
SHFE copper market on Tuesday moved upward after a slightly high open, with movements closely linked to China A-share market for the whole trading day. SHFE copper for November delivery fluctuated narrowly around RMB 57,500/mt in the morning session after opening at RMB 57,400/mt, and slid to a low level of RMB 57,080/mt at the tail of trading at noon due to a fall in China A-share market. In the afternoon session, the most actively-traded copper contract reached as high as RMB 57,770/mt along with rising China A-share market, with prices finally up RMB 710/mt, or a gain of 1.24%, returning above the 10-day moving average. Positions for SFHE November delivery copper contract were down 7,616 lots to 184,700 lots, and trading volumes fell to 267,000 lots. An unclear direction is available at the 5 and 10-day moving average according to technical indicators. Currently, support at the RMB 56,500/mt mark is solid, and SHFE copper market will at first point to RMB 58,000/mt after China A-share market effectively breaks through 2,680 points, and then may test RMB 58,500/mt.

In the spot market, Tuesday is the first trading day after a new contract month starts. Suppliers were wary of price offers. High-quality copper was traded at premiums of RMB 0/mt, and sales were smooth due to limited market supply, and as high-quality goods dominated market supply. Spot premiums rose gradually as copper prices on the SHFE market fell, with premiums generally at positive RMB 50/mt, and “Guixi” brand copper enjoyed strong sales advantages. As SHFE copper market gained with rising China A-share market, the SHFE/LME copper price ratio improved gradually, helping increase sales of imported copper. Discounts for hydro-copper expanded to negative RMB 100~150/mt as SHFE copper prices advanced; domestic standard-quality copper was offered at premiums of RMB 0/mt, with depressed sales due to pressure from both high-quality copper and low-priced imported hydro-copper. In the morning business, transactions were generally made between RMB 57,400~57,600/mt, and traded prices increased to RMB 57,450-57,650/mt in the afternoon. Market inquiries were brisk, and trading sentiment was high when prices were at low levels. SMM believes that spot premiums will climb higher along with rising trends and supply restrict. 

Aluminum
SHFE 1011 aluminum contract prices fluctuated higher after opening at RMB 15,500/mt. China’s A-shares rebounded, and moved toward the previous high of 2,680 points at closing, helping drive up SHFE aluminum prices to RMB 15,575/mt. SHFE 1011 aluminum contract prices later lost some gains due to profit-taking by long positions, with prices finally ending at RMB 15,530/mt, up 0.29%. Trading volumes of SHFE 1011 aluminum contract were only 451,558 lots due to a lack of speculative funds, and positions declined slightly by 650 lots.
 
Spot discounts widened after the delivery date of SHFE 1008 aluminum contract. The bullish financial market sentiment recently allowed traders to keep offers firm, and spot discounts mainly moved between RMB 60-80/mt in east China, but downstream buying interest was low as actual demand failed to report significant improvement. Meanwhile, SHFE aluminum prices closed with gains, still failing to improve spot market sentiment. The bullish spot markets and strengthening SHFE copper and zinc prices will affect SHFE aluminum prices positively, and aluminum prices will climb further in response.       

Lead
Trading sentiment in domestic lead markets was lackluster on Tuesday. Although rising LME lead prices helped producers keep prices firm, slight declines during earlier Asian trading hours kept downstream producers out of the market. Goods from Gejiu, Yunnan province were quoted between RMB 16,000-16,080/mt, and prices for well-known branded goods were in the RMB 16,200-16,300/mt range. Price gains on the LME lead market in the afternoon caused traders to raise prices, ranging from RMB 50-100/mt. However, market transactions were in a stalemate, as downstream producers were generally consuming inventories, showing low interest in purchases. 

Zinc
SHFE 1012 zinc contract prices opened slightly higher at RMB 17,350/mt in the morning session, with prices mainly fluctuating between RMB 17,200-17,400/mt. However, China’s A-shares slumped later, driving SHFE 1012 zinc contract prices lower to RMB 17,235/mt. SHFE 1012 zinc contract prices picked up rapidly in the afternoon supported by rising LME zinc prices and rebounding China’s A-shares, with prices finally closing at RMB 17,465/mt, up RMB 300/mt compared with the previous trading day, or up 1.75%. Positions of SHFE 1012 zinc contract were up 9,678 lots, with long positions growing significantly. Trading volumes of SHFE 1012 zinc contract exceeded 1.05 million lots, and market confidence was building as well in response to steady increases in SHFE zinc prices for three consecutive days. .
 
In the spot market, #0 zinc was traded at RMB 16,900/mt in the morning positively affected by higher SHFE zinc prices, but later spot prices fell to between RMB 16,800-16,850/mt due to lower downstream buying interest, with spot discounts moving between RMB 320-350/mt against SHFE 1011 zinc contract prices, and overall trading sentiment was lackluster. Trading volumes of #1 zinc were limited due to limited supply. Spot zinc prices failed to track the upward trends of SHFE zinc prices in the afternoon given lower downstream buying interest.

Tin
LME tin prices opened at USD 20,675/mt and closed at USD 21,050/mt on Monday, up USD 300/mt from a day earlier, with the highest price at USD 21,100/mt and the lowest price at USD 20,600/mt. Daily trading volumes were 247 lots and positions were 17,449 lots. LME tin inventories were up by 70 mt to 13,940 mt. On Tuesday, LME tin prices opened at USD 21,050/mt and tested the highest at USD 21,200/mt. Although the NY Empire State Index and home builders index from National Association of Home Builders (NAHB) were lower than market estimation, a softer US dollar index lent support to base metal prices. In addition, LME tin inventories have been reduced by 50% since January 2010, also helping support tin prices.
 
In the Shanghai tin spot market, domestic tin spot prices remained stable amid strong LME tin prices, and transactions were moderate, with few major brand tin experiencing price declines. Traded prices of tin from Yunnan Tin group were between RMB 149,500-150,000/mt and traded prices of tin from Yunnan Gejiu Zili Metallurgy Co., Ltd were between RMB 146,500-147,000/mt, while traded prices of unknown brand tin were around RMB 146,000/mt. A small portion of traders were reluctant to move goods and didn’t quote offers as they believed that current are too low. LME tin prices surged constantly, but domestic tin prices still stagnated, which is mainly due to lack of actual demand in domestic tin spot market. In addition, supply of unknown brand tin also dragged down tin prices. However, most smelters still kept offers firm, helping support mainstream tin prices. 
 
Nickel
LME nickel prices opened at USD 21,400/mt and closed at USD 21,560/mt on Monday, up USD 160/mt from a day earlier, with the highest price at USD 21,640/mt and the lowest price at USD 21,260mt. Daily trading volumes were 707 lots and positions were 97,866 lots. LME nickel inventories were up 12 mt to 117,012 mt. On Tuesday, LME nickel prices opened at USD 21,600/mt, reaching the highest at USD 21,950/mt and touching the lowest at USD 21,600/mt, with the latest at USD 21,880/mt, up USD 320/mt from a day earlier.
 
In the Shanghai nickel spot market, purchasing interest was not strong when LME nickel prices were flat in the morning session, and enquires increased in the afternoon session when LME nickel prices surged later. However, overall transactions were moderate as some traders were reluctant to move goods. Traded prices of nickel from Jinchuan Group were between RMB 146,500-147,000/mt and traded prices of imported nickel were between RMB 165,500-166,000/mt. Transactions were mainly done between traders, with few downstream purchasers entering the market.

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