SMM Daily Review - 2010/12/2 Base Metals Market

SHANGHAI, Dec. 3 (SMM) --

Copper

Supported by rising LME copper prices, SHFE copper market opened high at gap on Thursday. SHFE 1103 copper contract prices, the most active one, opened high at RMB 65,100/mt, and fluctuated narrowly at around RMB 65,000/mt. In the afternoon session, SHFE three-month copper contract prices rose to RMB 65,500/mt, and reached as high as RMB 65,520/mt before closing at RMB 65,380/mt, up RMB 1,970/mt, or a gain of 3.11%. Positions for SHFE 1103 copper contracts were up 7,424 lots to 171,568 lots, and trading volumes reached 239,000 lots. SHFE copper market closed at above all the moving averages on Thursday, and an upward momentum is technically available, with next target pointing to RMB 65,500/mt.

Spot trading sentiment was brisk in the morning session, and spot discounts were between negative RMB 200-250/mt. Discounts for high-quality copper were around negative RMB 200/mt, with strong transactions, mainly dealing between RMB 64,200-64,300/mt. The price difference between high-quality and standard-quality copper was only between RMB 50-100/mt. Market reported brisk hedging trades with the emergency of price gap between near-term and forward contracts in the SHFE copper market. However, hedging trades will be depressed if copper prices continue to rise on Friday, and this will tighten market supply as a result. Spot traded prices gained to RMB 64,250-64,400/mt in the afternoon as SHFE copper prices advanced. Downstream producers were wary of purchases at higher prices.

Aluminum

SHFE 1103 aluminum contract became the most actively-traded contract on Thursday. SHFE 1103 aluminum contract prices climbed to RMB 16,620/mt after opening at RMB 16,600/mt, and later fluctuated at high levels in the morning session, and were weaker than other base metals prices due to sluggish trading sentiment and lower market optimism. The Shanghai Stock Exchange composite index dipped in the afternoon session, allowing SHFE 1103 aluminum contract prices to lose some gains, and finally SHFE 1103 aluminum contract prices closed at an intraday low of RMB 16,510/mt, up RMB 150/mt, or up less than 1%. SMM predicts SHFE 1103 aluminum contract prices will fluctuate around the 60-day moving average in the near term.

Traders were moving goods actively when spot aluminum prices climbed to above RMB 16,000/mt, and a small number of traders made purchases, but downstream producers continued to stand on the sidelines, keeping trading sentiment sluggish. Actual traded prices were between RMB 16,060-16,080/mt in east China on Thursday.
 
Lead

In China’s domestic lead markets, market players kept strong wait-and-see sentiment on Thursday, due to LME lead prices fell after opening, coupled with volatile LME lead prices recently. Trading sentiment was quiet. Traded prices in domestic lead markets were between RMB 17,050-17,100/mt in the morning, and rose in the afternoon tracking climbing LME lead prices, with transactions made between RMB 17,100-17,200/mt. Some downstream producers rushed to purchase in the afternoon, helping improve trading sentiment. 

Zinc

 On Thursday, SHFE 1103 zinc contract prices opened higher at RMB 18,020/mt boosted by LME zinc prices, and mostly moved between RMB 17,900-18,100/mt during the day. In the midday, the US dollar index edged down from 80.9 to 80.55, and LME zinc prices surged to above USD 2,200/mt in response, with prices once hitting USD 2,235/mt. As a result, SHFE zinc prices rose to between RMB 18,300-18,500/mt and finally closed at RMB 18,360/mt, up 4.41%. Trading volumes increased by 220,000 lots to 1.08 million lots, and total positions increased by 20,444 lots to 297,442 lots, with long position momentum stronger.

SHFE 1103 zinc contract prices opened high and moved higher tracking LME zinc prices on Thursday, with prices struggling at RMB 18,000/mt mark. Zinc spot prices rose in response. #0 zinc was traded around RMB 17,400/mt in the morning session, with discounts of RMB 600/mt against SHFE 1103 zinc contract prices. When SHFE zinc prices climbed in the midday, mainstream traded prices of #0 zinc were around RMB 17,450/mt, with some brands traded at RMB 17,470/mt; #1 zinc was traded around RMB 17,400/mt. In Guangdong spot market, #0 zinc was traded between RMB 17,400-17,500/mt, while #1 zinc was traded between RMB 17,300-17,350/mt. Spot discounts expanded to RMB 650/mt against SHFE 1103 zinc contract prices when SHFE zinc prices rose in the afternoon, and #0 zinc was traded around RMB 17,700/mt. The transaction was mainly made in the morning session between traders, and the market sentiment was lackluster when zinc prices rose to a high of RMB 17,700/mt in the afternoon.

Spot zinc prices rallied to RMB 17,000/mt on Thursday, even reaching a high of RMB 17,700/mt in the afternoon. Some traders believe that zinc prices should continue rebounding in the near term, and spot discounts will expand. As a result, traders purchased actively, waiting for arbitrage opportunities. Downstream buyers purchased on an as-needed basis, since they have built inventories previously. Smelters continued to take a wait-and-see attitude, since current spot zinc prices did not reach their psychological levels.

Tin

In Shanghai tin markets, mainstream prices rose slightly on Thursday, boosted by gains in LME tin prices on Wednesday. Varieties of goods were still limited in markets, with unknown brand tin traded between RMB 156,800-157,200/mt, and tin from Gejiu Zili Metallurgy Company, as well as Gejiu Nonferrous Metals Processing Company traded between RMB 157,200-157,500/mt. In general, trading sentiment improved from a day earlier, due mainly to higher buying interest from downstream produces with strong LME tin prices. SMM expects prices in domestic tin markets will stabilize in the near future with support from the stronger LME tin markets.

Nickel

LME nickel market opened at intraday low at USD 22,850/mt and closed at a intraday high at USD 23,689/mt on Wednesday night, up by USD 844/mt from a day earlier. Daily trading volumes were 2,381 lots and positions were 95,701 lots. Boosted by strong PMI from various countries as well as better-than-expected employment data in November from the US ADP Employers Service, LME base metal closed with gains across the board.

On Thursday, LME nickel prices advanced during the Asian trading hours due to support from strong LME nickel prices performance on Wednesday night during the European trading hours. LME opened at USD 23,550/mt, and climbed to USD 23,830/mt after a brief decline at USD 23,450/mt during the Asian trading hours. LME nickel inventories were down by 1,014 mt to 130,788 mt. Close attention should be paid to results of European Central Bank meeting. Uncertainties from concern that US dollar may be pushed up due to possible monetary tightening policy in China still lingered in the market.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 179,500-180,000/mt, up by RMB 3,500/mt. Market players still hesitant towards future market outlook, and traders still adopted a wait-and-see attitude, resulting in tepid transactions. Mainstream traded prices of nickel from Russia were between RMB 178,500-179,000/mt, up by 4,500/mt. Transactions of nickel from Russia were brisker than nickel from Jinchuan Group.

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