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SMM Daily Review - 2010/9/10 Base Metals Market
Sep 13,2010 09:55CST
smm insight
base metals prices in shanghai metals market

SHANGHAI, Sep. 13 (SMM) –
SHFE copper market continued to open low on Friday, with prices moving lower in the morning. The December delivery copper contract on the SHFE market narrowly fluctuated at RMB 58,500/mt after opening at this price mark. The most actively-traded copper contract fell as low as RMB 58,210/mt at the midday following declines in Shanghai Stock Exchange Composite index. However, bargain hunting helped SHFE December copper contract rebound to RMB 58,850/mt. Finally, SHFE December delivery copper contract closed at RMB 58,810/mt, up RMB 60/mt. Both trading volumes and positions experienced moderate performance. The near-term copper contracts showed stronger movements than the forward-term contracts on the SHFE market, a sign of spot support before the delivery date. The previously bullish trend on technical indicators has been negatively affected by marked declines on Thursday, and with downward room still technically available, but SMM believes that any downward room will be limited. China will announce a slew of major economic data on Saturday, which will give a direction for the market. 

Trading sentiment in the spot market was brisk. Spot premiums emerged when SHFE copper prices experienced corrections at low levels. Spot premiums for high-quality copper were between positive RMB 70-100/mt, with deals between RMB 58,500-58,650/mt, and downstream producers represented high buying interest. With price rebounds in the SHFE copper market, spot premiums increased to positive RMB 100-130/mt, and premiums for standard-quality copper stabilized at positive RMB 50/mt. Spot copper prices saw increases in the low-end due to rapid price rebounds in the SHFE copper market, helping traded prices increase to RMB 58,600-58,900/mt, approaching RMB 59,000/mt.

According to data tallied by Shanghai Futures Exchange (SHFE), copper stocks dropped significantly by 7,892mt to 98,025 mt in the week ended September 10 after a decline of over 4,600 mt in the previous week. Increased declines of copper inventories indicate improved consumption since the beginning of September, and stock replenishment for the National Day holiday, which lent support on copper prices.

Although LME aluminum prices plunged, SHFE aluminum prices fell at a slower pace on September 10th. SHFE 1012 aluminum contract prices moved narrowly after opening slightly lower at RMB 15,580/mt in the morning session. Guangxi provincial government required local aluminum producers to cut production by 50% in order to meet China's energy efficiency targets. Long momentum emerged in the afternoon session after opening, attracting more speculative funds, and trading volumes increased significantly in response. SHFE 1012 aluminum contract prices moved higher gradually, with prices returning to above RMB 15,800/mt and hitting RMB 15,805/mt, and finally prices ended at RMB 15,790/mt, up RMB 195/mt, or up 1.25%. Positions of SHFE 1012 aluminum contract increased by nearly 5,000 lots. SHFE aluminum prices outperformed SHFE copper and zinc prices on September 10th, and news of aluminum production cuts helped boost market confidence, but further support is still needed for SHFE aluminum prices to rise further in the future.

In the spot market, spot discounts narrowed, and traders in east China held high interest in moving goods, with most deals made between RMB 15,170-15,200/mt. Later, the soaring SHFE aluminum prices near the noon stimulated the buying interest by downstream fabricators, with traded prices climbing to above RMB 15,200/mt, and spot trading sentiment was bullish. Some traders in south China were reluctant to move goods, and market buying sentiment was brisk.   

Transactions in domestic lead market were quiet on last Friday. Downstream producers returned to stand on the sidelines and were wary of purchasing with pessimistic sentiment from declines in LME lead market. Deals for unknown branded lead were done in the RMB 16,150-16,200/mt range, while well-known branded lead was traded between RMB 16,250-16,350/mt. In general, traded prices were down. But part of traders kept well-known branded lead prices firm at around RMB 16,400/mt due to optimistic outlook, but no deals were done at the price mark.

SHFE zinc prices tracked stock market trends, with SHFE 1101 zinc contract prices slipping to below the daily moving average in the morning session. In the afternoon session, the weakening US dollar and rising Shanghai Stock Exchange Composite Index helped drive base metals prices higher slightly, and SHFE 1101 zinc contract prices returned to above the daily moving average as well, but zinc prices were weaker than aluminum and copper prices, with SHFE 1101 zinc contract prices finally closing at RMB 17,815/mt, down 0.28%. SHFE 1101 zinc contract has become the most actively-traded contract, with trading volumes reaching 1.18 million lots, and positions increased steadily by 25,990 lots to 230,000 lots, with long momentum stronger than short momentum.
In the Shanghai spot market, #0 zinc was traded between RMB 17,150-17,200/mt, with spot discounts ranging between RMB 400-430/mt against SHFE 1101 zinc contract prices, while #1 zinc was traded between RMB 17,100-17,150/mt. In the Guangdong spot market, #0 zinc was traded in the RMB 17,150-17,200/mt range, with deals of some brands made at RMB 17,100/mt, while #1 zinc was traded in the RMB 17,100-17,150/mt range. Downstream producers made some purchases with prices near RMB 17,000/mt, while smelters believe zinc prices will likely increase further after short-term corrections.

LME tin prices opened at USD 21,680/mt and closed at USD 21,600/mt last Thursday, down USD 50/mt from a day earlier, with the highest price at USD 21,800/mt and the lowest price at USD 21,225/mt. Trading volumes were 405 lots and positions were 16,379 lots. LME tin prices opened at USD 21,450/mt last Friday. Affected by the performance of the US dollar index, LME tin prices rebounded after a decline, testing the lowest at USD 21,225/mt and reaching the highest at USD 21,650/mt. LME tin inventories were down by 385 mt to 13,970 mt.
In the Shanghai tin spot market, mainstream tin prices continued declining amid LME tin prices slump. Traded prices of major brand tin were between RMB 145,600-146,500/mt and traded prices of unknown brand tin were between RMB 144,500-145,000/mt. Overall trading sentiment was still quiet, and spot tin prices were still on downward track. 
Last Thursday, LME nickel prices opened at USD 22,600/mt, reaching the highest price at USD 22,850/mt ant touching the lowest price at USD 22,250/mt, down USD 215/mt from a day earlier. Daily trading volumes were 2,890 lots and positions were 97,485 lots. LME tin inventories were down by 324 mt. LME base metal prices mostly ended with losses last Thursday, with stronger equity markets and upbeat U.S. data failing to reverse early losses during the Asian trading hours, which was mainly due to market rumor that Chinese authorities were investigating positions in the rubber market.
LME nickel prices opened at USD 22,600/mt last Friday, falling to test USD 22,450/mt when the US dollar index climbed to test 82.94 at around 11:00 and later climbing to test USD 22,785/mt when the US dollar index fell to test 82.49 at around 17:00. Daily trading volumes were 373 lots and positions were 99,145 lots. LME nickel inventories were up by 204 mt to 119160 mt. Market wait-and-see sentiment was strong at the weekend before the release of economic data.
In the Shanghai nickel spot market, transactions were sluggish. Traders largely adopted a wait-and-see attitude and purchasing interest from downstream consumers was low. Traded prices of nickel from Jinchuan Group were between RMB 170,000-170,500/mt, down USD 250/mt, and traded prices of nickel from Russia were between RMB 168,500-169,000/mt, down USD 500/mt from a day earlier.


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