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SMM Daily Review - 2010/8/27 Base Metals Market
Aug 30, 2010 10:25CST

SHANGHAI, Aug. 30 (SMM) --
SHFE copper market opened high on Friday, with SHFE December delivery copper contract opening at RMB 57,450/mt. The most actively-traded copper contract on the SHFE market moved narrowly at around RMB 57,500/mt in the morning session. In the afternoon, Shanghai Stock Exchange Composite Index (SSE composite index) broke through 2,600 points, returning 2,610 points. Supported by rising stock market, SHFE December delivery copper contract reached as high as RMB 57,870/mt before closing at RMB 57,830/mt, up RMB 520/mt, or a gain of 0.91%. Trading volumes and positions both experienced moderate declines due to the weekend and the end of the month. Trading volumes reached 274,500 lots, while positions were up slightly 2,906 lots to 159,000 lots. SHFE copper market has stood at above the short-term moving average, keeping its upward momentum, but with no strong rising momentum available based on technical indicators.

In the spot market, downstream producers generally took a wait-and-see attitude as SHFE copper market fluctuated narrowly after a high open. Mixed views were reported among cargo-holders, giving little support for higher spot premiums. In the morning business, premiums for high-quality copper were reported at positive RMB 20-50/mt, and with little buying interest heard for "Guixi" brand copper at premiums of positive RMB 70-80/mt; discounts for standard-quality copper were at negative RMB 20-50/mt, and imported copper was reported at discounts of negative RMB 70-100/mt. Sales of domestic copper were depressed, as buyers preferred to purchase copper with prices reported at premiums due to small price gap, and due to sell-offs of imported copper at low prices. SHFE copper price in the afternoon session climbed higher, with SHFE current-month copper contract reaching as high as RMB 57,900/mt, supporting market confidence. Hence, offers for domestic high-quality copper were firm, with some prices heard at RMB 58,000/mt. Although actual transactions failed to turn better, market sentiment improved significantly. Next Monday, LME market will be closed, and SHFE copper market will move independently. If SSE composite index is able to stand firm at 2,600 points, and move higher, SHFE copper market will advance to RMB 58,000-58,500/mt, while market transactions will be low at first, and then improve due to approach of a new month.  

SHFE aluminum prices were weak on August 27th despite that LME aluminum prices surged and SHFE copper and zinc prices posted significant gains, and SHFE 1011 aluminum contract prices slipped gradually after opening slightly higher at RMB 15,375/mt, with prices dipping to RMB 15,300/mt. At the tail of trading, the rebounding Shanghai Stock Exchange Composite index helped drive aluminum prices higher, with SHFE 1011 aluminum contract prices finally closing at RMB 15,325/mt, down RMB 5/mt, or down 0.03%. Total trading volumes were 50,136 lots, and total positions declined slightly by 38 lots. Trading volumes shrank sharply, an indication of lower interest by market players to invest in SHFE aluminum market.

Trades east China kept offers firm in morning session as SHFE aluminum prices opened higher, but downstream response was neutral, with struggles reported at RMB 15,000/mt. Later, aluminum prices edged lower, forcing traders to cut offers, with mainstream traded prices falling gradually, and market sentiment remained sluggish. High temperature period and power restrictions dampened aluminum fabricators since early August, and aluminum stocks remained higher despite of signs of falling, so aluminum prices faced heavy upward pressure, and any increases in aluminum prices will need improvement in financial market sentiment and substantial recovery in aluminum consumption. 

LME lead market experienced corrections above USD 2,000/mt following a price rally, and continued Thursday's rising trend in the afternoon trading session, leading to mixed views towards market outlook among downstream producers. Some of them, which needed to maintain normal operations, purchased some raw materials, but most downstream producers were wary of purchases due to LME lead prices rebounds, despite of inquiries. Trades raised lead prices by around RMB 50/mt following a rise in LME lead market in the afternoon. However, market was still prevailed by strong wait-and-see sentiment, with lackluster transactions. Deals were done in RMB 15,900-16,050/mt range in today's Shanghai market.     

SHFE 1012 zinc contract prices opened higher on August 27th positively affected by LME zinc prices, with prices tracking the Shanghai Stock Exchange Composite Index trends and moving along the daily moving average. In the afternoon, the Shanghai Stock Exchange Composite Index jumped to 2,613.49 points, and LME zinc prices advanced to USD 2,065/mt on the electronic trading. In response, SHFE 1012 zinc contract prices climbed to as high as RMB 17,195/mt, and finally closed at RMB 17,175/mt, up RMB 230/mt, or up 1.36%. Trading volumes of SHFE 1012 zinc contract fell to 1.44 million lots, while positions declined as well by 5,626 lots to 376,500 lots. Both trading volumes and positions fell ahead of weekend and due to the approaching month-end. Long positions were higher than short positions, an indication of market expectations of improving zinc prices and consumption in the following week, especially in September.

SHFE 1012 zinc contract prices opened higher positively affected by LME zinc prices, with prices later mainly moving between RMB 16,950-17,025/mt following Shanghai Stock Exchange Composite Index trends. Spot zinc prices were relatively stable, and #0 zinc was traded around RMB 16,650/mt in Shanghai, with spot discounts of RMB 350/mt against SHFE 1012 zinc contract prices, while #1 zinc was traded around RMB 16,600/mt. Spot transactions improved from a day earlier, but overall trading sentiment remained neutral. The rising SHFE zinc prices in the afternoon failed to drive up spot market sentiment, with spot transactions lackluster. Downstream producers believe the possibly increasing orders in September will help stimulate zinc spot markets.  

LME tin prices opened at USD 20,400/mt and closed at USD 21,325/mt last Thursday, up USD 1,125/mt from a day earlier, with the highest price at USD 21,500/mt and the lowest price at USD 20,400/mt. Trading positions were 310 lots and positions were 16,340 lots. LME tin inventories were down by 120 mt to 13,975 mt. Last Friday, supported by a softer US dollar index, LME tin prices opened at USD 21,001/mt and continued to climb significantly to test USD 21,750/mt, setting a new high. LME tin inventories continued to decline, lending support for tin prices.

In the Shanghai tin spot market, transactions improved, boosted by LME tin price surge on Thursday and continuous price increase on Friday. Downstream purchasers mainly adopted a wait-and-see attitude when LME tin prices were relatively weak in the morning trading session, but purchases from downstream consumers became brisk and some smelters and traders showed unwillingness to move goods when LME tin prices strengthened in the afternoon trading session. Yunnan Tin group lifted offers to RMB 148,500-149,000/mt. Market traded prices of tin from Yunnan Tin group were around RMB 147,500/mt and traded prices of unknown brand tin were between RMB 145,500-146,000/mt. Although transactions improved from sudden price rally, market confidence didn't turn to absolute bullish. Whether or not price can retain upward momentum shall depend on performance of LME nickel prices and downstream consumption.

Last Thursday, LME nickel prices rebounded significantly after consecutive declines from better-than-expected initial jobless claim from the US and a softer US dollar index. LME nickel prices closed at USD 20,550/mt, up USD 245/mt from a day earlier, successfully standing above RMB 20,000/mt. LME nickel inventories were up by 654mt from a day earlier. Last Friday, the US dollar index fluctuated around 83 during the Asian trading period, and LME nickel prices fluctuated widely between USD 20,300-20,750/mt. 

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 165,000-165,500/mt and mainstream traded prices of nickel from Russia were between RMB 164,000-164,500/mt. Transactions were brisk and trading volumes increased significantly from several days earlier due to rally of other base metal prices and positive expectation on market demand.    


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