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SMM Daily Review - 2010/11/30 Base Metals Market
Dec 1,2010 09:49CST
data analysis

SHANGHAI, Dec. 1 (SMM) --


The copper for delivery in three months in the SHFE market opened high at RMB 62,300/mt on Tuesday, and fluctuated highly at RMB 62,500/mt in the morning session. At the midday, China’s stock market dived, down as much as more than 3%, and SHFE copper market lost support and slid as a result. Before the end of trading at the midday, SHFE three-month copper contract prices fell to RMB 61,530/mt, reversing its previous rising trend, down below the 60-day moving average again. The most actively-traded copper contract prices in the SHFE market returned above RMB 62,500/mt in the afternoon session due to bargain hunting, and finally closed at RMB 62,660/mt, up RMB 730/mt, or a gain of 1.18%. Positions for SHFE three-month copper contract prices were down slightly by 1,684 lots to around 160,000 lots, and trading volumes fell to less than 300,000 lots. SHFE copper market continued to fluctuate around the 60-day moving average on Tuesday, along with cautious trading sentiment with the arrival of the month’s end, and unstable performance in domestic stocks market before the upcoming China’s Central Economic Work Conference. The struggle between shorts and longs was intense, but the long sentiment appeared weak amid the overall negative environment.

In the spot market, some downstream producers made few purchases due to tight cash flow at the end of the month. Some traders were waiting for higher prices to move goods, as SHFE copper market hovered at highs in the morning session, while other cargo-holders were unable to move goods, since high copper prices in the SHFE market made them unable to make hedging trading. Hence, overall trading sentiment was low. Spot discounts were between negative RMB 100-150/mt, and deals were made in the RMB 62,100-62,250/mt range. SHFE copper prices fell rapidly during the major spot trading hours, and traders narrowed spot discounts to negative RMB 50-0/mt, but rapid price declines in the SHFE copper market resulted in a wait-and-see attitude. As a result, traded prices dropped to RMB 61,800-61,900/mt, failing to hold at RMB 62,000/mt. SHFE copper prices rallied from earlier declines in the afternoon, and spot discounts returned to morning levels in response, with traded prices around RMB 62,000/mt, but transactions turned weaker. 


SHFE aluminum prices fluctuated narrowly in the morning session, and SHFE 1102 aluminum contract prices remained weak after opening at RMB 16,180/mt, and later slipped as the Shanghai Stock Exchange composite index fell below 2,800 points. However, SHFE 1102 aluminum contract prices reversed some losses in the afternoon following SHFE copper prices, with the highest level and the lowest level at RMB 16,220/mt and 16,060/mt, respectively, and finally closed at RMB 16,205/mt, up 0.09%. Trading sentiment remained weak, and SHFE 1102 aluminum contract prices are expected to continue to fluctuate in the near term.

Traders were moving goods actively when SHFE aluminum prices fluctuated, and spot premiums remained between RMB 0-10/mt in east China, with deals mainly made between RMB 15,880-15,910/mt. Traders only reduced prices slightly after SHFE aluminum prices tumbled, but most buyers chose to stand on the sidelines due to pessimistic expectations, keeping market sentiment sluggish.   


With sharp declines in LME lead prices on Tuesday, downstream producers in China’s domestic lead markets kept low buying interest. Some transactions were made below RMB 17,000/mt in Shanghai markets, while smelters’ offers were barely above this level.

Currently, views about sustainability at RMB 17,000/mt in domestic lead prices are mixed in markets, causing various interest of selling among smelters. However, the losses of more than USD 100/mt in LME lead prices will surely stimulate cross-market profit-takings, with certain amounts of goods dumped. Therefore, supply of lead ingot will not be tight in the near future despite some smelters’ low selling interest. Mainstream traded prices were around RMB 17,000/mt.       


On Tuesday, SHFE 1103 zinc contract prices fluctuated narrowly between RMB 17,430-17,530/mt in the morning session. Since LME zinc prices fell sharply from USD 2,120/mt to USD 2,065/mt in the midday, SHFE 1103 zinc contract prices were dragged down and dipped to a low of RMB 17,090/mt, and pared some losses later, with prices finally closing at RMB 17,515/mt. Trading volumes increased by 30,000 lots to 1.26 million lots, and total positions decreased by 4,522 lots to 274,678 lots, with short position momentum stronger.

On Tuesday, SHFE 1103 zinc contract prices fluctuated between RMB 17,450-17,550/mt in the morning session. In Shanghai spot market, #0 zinc was traded between RMB 16,850-16,900/mt in the morning session, with discounts of RMB 580/mt against SHFE 1103 zinc contract prices, and spot discounts of some imported zinc were around RMB 650/mt against SHFE 1103 zinc contract prices; #1 zinc was traded between RMB 16,800-16,850/mt. Spot discounts remained unchanged when SHFE zinc prices fell to a low of RMB 17,090/mt in the midday, but traded prices of #0 zinc fell to RMB 16,700/mt in response. Downstream buyers purchased modestly, and the transaction was weak. In Guangdong spot market, traded prices of #0 zinc were between RMB 16,850-16,900/mt, and traded prices of #1 zinc were between RMB 16,750-16,800/mt. #0 zinc was traded at RMB 16,700/mt, and #1 zinc was traded at RMB 16,600/mt when SHFE zinc prices fell in the midday.


In Shanghai tin markets, traded prices continued to fall on Tuesday, and trading sentiment remained quiet. Market supply was quite limited recently, and mainstream prices were dragged down by some traders’ lower offers. Tin from Gejiu Zili Metallurgy Company and Nanshan Tin Industry Company was traded between RMB 156,500-157,000/mt, and some deals for tin from Yunnan Tin Group were made at RMB 160,000/mt. With constantly falling tin ingot prices, smelters were unwilling to move goods on cost concerns, due to slower pace of price losses in raw materials. Some smelters express they may choose to reduce output if tin prices continue to fall in the near future.


LME nickel market opened at USD 22,600/mt and ended at USD 22,660/mt on Monday, up 60/mtrom a day earlier, with the highest price at USD 22,950/mt and the lowest price at USD 22,349/mt. Daily trading volumes were 1,894 lots and positions were 94,913 lots. European debt crisis still haunted the market.

During the Asian trading hours on Tuesday, LME nickel prices opened at USD 22,600/mt and experienced volatile movement later. As the Ireland bailout hasn’t eased investors concern that more European countries may need financial bailout, the US dollar climbed from 80.68 to 80.98 and LME nickel prices fell to USD 22,400/mt in response. Later, with the US dollar index slipped to test 80.73, LME nickel prices advanced to test USD 22,800/mt. Finally, as the US dollar index advanced again, LME nickel prices slipped in response. Other base metal prices climbed slightly during the Asian trading hours on Tuesday, and only LME nickel prices recorded losses. LME nickel inventories were down by 42 mt to 130,866 mt.

Transactions were relatively quiet in the Shanghai nickel spot market. Amid volatile price movement, market players adopted a wait-and-see attitude and made purchases cautiously as a clearer direction is unavailable. Transactions of nickel from Russia were brisk compared to nickel from Jinchuan Group. Mainstream traded prices of nickel from Jinchuan Group were at RMB 176,000/mt, up by RMB 250/mt, and mainstream traded prices of nickel from Russia were between RMB 173,500-174,000/mt, up by RMB 500/mt.


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