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SMM Daily Review - 2010/9/3 Base Metals Market
Sep 6,2010 09:51CST
data analysis

SHANGHAI, Sept. 6 (SMM) --


SHFE copper market continued to fluctuate at high levels. The December delivery copper contract on the SHFE market opened high at RMB 59,970/mt, and was supported by buying activity after briefly dropping to RMB 59,600/mt in earlier trading, then reaching as high as RMB 60,000/mt. However, the resistance at the RMB 60,000/mt market was strong, and the most actively-traded copper contract moved above the daily average for most of morning session. In the afternoon, SHFE December delivery copper contract fell below the daily average due to declines in China’s domestic markets, but remained slow to weaken. Finally, SHFE December delivery copper contract closed at RMB 59,900/mt, down RMB 140/mt. Trading volumes and positions both dropped, an indication that trading sentiment was cautious in view of the upcoming release of the US non-farm employment data.

In the spot market, cargo-holders were eager to move goods for cash generation at high prices in view of price resistance at the RMB 60,000/mt mark, expanding spot discounts from negative RMB 150 to 250/mt to attract purchasing interest. Domestic copper was negatively affected, with spot discounts heard at around negative RMB 200/mt. Transactions on Friday were generally made between RMB 59,500-59,700/mt. Downstream producers were wary of purchases, only entering for purchases when prices fell. Despite of no interest in chasing higher prices, they generally believe that domestic copper prices will finally rise above the RMB 60,000/mt market due to strong movements since September.

According to data tallied by Shanghai Futures Exchange (SHFE), copper inventories were down 4,665 mt last week, to below 106,000 mt, a sign of support from gradual improvement in consumption since September.


SHFE aluminum prices outperformed other base metals prices on September 3rd. SHFE 1012 aluminum contract prices opened at RMB 15,720/mt, and later faced resistance due to weakening other base metals prices and bearish Shanghai Stock Exchange Composite Index, with prices mainly fluctuating in a narrow band. SHFE 1012 aluminum contract prices hit the highest level and lowest level at RMB 15,735/mt and RMB 15,635/mt, respectively, and finally closed at RMB 15,690/mt, up RMB 35/mt, or up 0.22%. Positions of SHFE 1012 aluminum contract increased by 9,994 lots. SHFE 1012 aluminum contract prices closed with gains, an indication of technical rebound and improving long momentum. Technical indicators show that SHFE aluminum prices will likely continue to move higher. However, any upside room for SHFE aluminum prices will still depend on downstream consumption.

Spot discounts widened to above RMB 100/mt against SHFE 1009 aluminum contract prices, and downstream purchases increased ahead of weekend, but most buyers still adopted a wait-and-see attitude, leaving lower buying interest. Spot aluminum prices moved between RMB 15,220-15,250/mt, with most deals made at the low-end, and overall market sentiment was general.   


After LME lead prices moved lower after a high open during Asian trading hours, downstream producers in domestic lead markets were wary of purchases, and remained on the sidelines. In the afternoon, LME lead prices pared early losses and climbed higher, some buyers entered the market for purchases, as evidenced by traders’ report that transactions in the afternoon improved. However, traded prices in domestic lead markets failed to rally due to low buying interest over the past several days, despite of rising LME lead prices. Hence, traders didn’t lift prices in the afternoon business. On Friday, goods from Gejiu, Yunnan province were traded at around RMB 16,150/mt, while well-known branded goods were made between RMB 16,200-16,300/mt in the Shanghai market.


SHFE 1012 zinc contract prices opened high but moved lower negatively affected by LME zinc prices, with prices mainly moving between RMB 17,700-17,760/mt. LME zinc prices fell to as low as USD 2,138/mt in the morning session, dragging down SHFE 1012 zinc contract prices to RMB 17,655/mt, and SHFE 1012 zinc contract prices finally closed at RMB 17,745/mt, down RMB 115/mt, or down 0.64%, with prices still standing above all moving averages. Trading volumes of SHFE 1012 zinc contract were over 1.26 million lots, down 120,000 lots compared with the previous trading day, while positions reached over 280,000 lots, also down 28,516 lots, with long momentum flat at short momentum.

Negatively affected by SHFE 1012 zinc contract prices, spot zinc prices edged lower. In the Shanghai spot market, #0 zinc was traded around RMB 17,280/mt, with spot discounts of RMB 450/mt against SHFE 1012 zinc contract prices, while #1 zinc was traded around RMB 17,230/mt. In the afternoon, #0 zinc was traded between RMB 17,250-17,300/mt in the Guangdong spot market, while #1 zinc was traded between RMB 17,200-17,250/mt. Spot market sentiment was lackluster, and downstream producers were unwilling to accept spot zinc prices near RMB 17,300/mt. As a result, inquiries were limited in spot markets, and some traders said they made no deals.


LME tin prices opened at USD 21,400/mt and closed at USD 21,500/mt last Thursday, up USD 75/mt from a day earlier, with the highest price at USD 21,525/mt and the lowest price at USD 21,375/mt. Trading volumes were 119 lots and positions were 16,360 lots. LME tin inventories were up by 170 mt to 14,205 mt. LME tin prices extended gains boosted by better-than-expected economic data. Last Friday, LME tin prices opened at USD 21,500/mt and fell to the lowest at USD 21,300/mt. Market remained cautious and base metal prices were weighed before the release of US non-farm payroll data.

In the Shanghai tin spot market, tin prices began to decline due to sluggish consumption. Low-end prices slipped by RMB 500/mt to RMB 146,000/mt, and transactions at high-end price were few. Traded prices of major brand tin from Yunnan Tin group, Yunnan Nonferrous Metals and Yunnan Gejiu Zili Metallurgy were between RMB 146,500-148,000/mt and traded prices of unknown brand tin were between RMB 146,000-147,000/mt. Overall trading sentiment was sluggish, and downstream consumers made purchases only on an as-needed basis, waiting for clearer guidance in the following week. 


Last Thursday, LME nickel prices closed at USD 21,700/mt, up USD 524/mt from a day earlier. LME nickel inventories were up by 420 mt. LME base metal prices extended gains due to re-kindled optimistic sentiment from upbeat US economic reports. On Friday, LME nickel prices opened at USD 21,700/mt and climbed to USD 22,050/mt after slipping to USD 21,625/mt. LME nickel inventories were down by 156 mt on daily basis.

In the Shanghai nickel spot market, transactions were brisk, though downstream purchases only accounted for limited trading volumes. Traded prices of nickel from Jinchuan Group were between RMB 169,000-169,500/mt and traded prices of nickel from Russia were between RMB 168,000-168,500/mt, both up by RMB 500/mt on a daily basis. Market insiders were all bullish towards nickel price outlook, and some traders were even unwilling to move goods for the expectation of higher prices in the future.

SMM believe, energy saving and emission cutting crackdown will force NPI producers with blast furnaces halt production, so demand from stainless steel mills will shift to refined nickel. In this context, nickel prices received support from fundamentals, and bullish sentiment was strong in the market.


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