[Sep 30, 2010]Accelerated Pace of RMB Appreciation to Favor Base Metal Prices - Highlight from China Base Metal Briefing

The RMB has been steadily appreciating against the US dollar recently, hitting several new highs and breaking the 6.7 mark for the first time since 2005.  SMM believes that base metal prices will continue rising over the next 2-3 months, given expectations of further RMB appreciation, a weaker US dollar, and the approach of a peak demand period.

Copper:  Domestic smelters maintained normal operations and despite growing efforts to conserve energy and cut emissions, domestic copper smelters remain unaffected.  However, continuous declines in the SHFE/LME copper price ratio further reduced supplies of imported copper, with almost no offers for imported copper heard in the market.  (Page 3)

Aluminum:  SMM conducted a survey of aluminum plate and strip producers in Jiangsu and Zhejiang provinces and found operating rates in the two regions fell significantly during August from heavy government pressure to conserve energy and cut emissions.   (Page 7)

Zinc:  SMM believes that the US dollar will likely weaken during the Chinese National Day holiday period and LME zinc prices will likely test previous highs.  (Page 10)

Lead:  LME lead prices hit a 4-month high of USD 2,321/mt as a result of a weaker US dollar during China's Mid-Autumn Day holiday, but later fell back after the holiday.  With the approach of Chinese National Day holiday, trading sentiment in domestic lead market turned soft, with most deals done between RMB 16,300-16,650/mt.  (Page 14)

Nickel:    Large stainless steel mills are having difficulties purchasing NPI, while (4-6%) NPI and (10-15%) NPI prices advanced slightly.   (Page 17)