Metals News
SMM Daily Review – 2010/12/3 Base Metals Market
smm insight

SHANGHAI, Dec. 6 (SMM) –

SHFE copper market tracked movements in the LME copper market on Friday. The copper for delivery in three months in the SHFE market experienced stable performance at the opening, but fell rapidly later due to the failure to climb higher in the LME copper market, down as low as RMB 64,700/mt. However, SHFE three-month copper contract prices pared previous losses due to rallying LME copper prices, and finally closed at RMB 65,790/mt. Positions were up 7,946 lots, and trading volumes were unchanged from a day earlier. The longs were slightly higher than the shorts, but the cautious attitude still existed. Currently, both LME and SHFE copper prices were closer to the previous high levels, feeling great pressure to move higher. If the US dollar index falls below the 10-day moving average, LME copper prices may advance further to test the previous high level of USD 8,900/mt.

In the spot market, the failure to advance further in the SHFE copper market in the morning session weighed down the long sentiment to an extent. Transactions were mainly for high-quality copper, with discounts at around negative RMB 200/mt, and spot discounts for standard-quality copper were at negative RMB 250/mt. Deals were largely done in the RMB 64,200-64,300/mt. At around 11:00 am, SHFE copper prices dropped rapidly, and spot discounts narrowed to negative RMB 150-200/mt, with traded prices down to RMB 64,100-64,250/mt. As costs for cargo-holders who made purchases in the morning business were at around RMB 64,300/mt, the selling interest was depressed when SHFE copper prices slid to RMB 64,250/mt, with no offers heard in the market briefly. SHFE copper prices rallied robustly in the afternoon session, and spot discounts remained between negative RMB 200-250/mt, but transactions improved from conditions in the midday. Recently, the proportion of imported copper in the total market supply dropped, and domestic goods dominated market supply, highlighting the phenomenon that the low SHFE/LME copper price ratio has depressed imports, and signaling that spot discounts will not expand significantly in the near future.

According to data tallied by Shanghai Futures Exchange (SHFE), copper inventories were down 5,815 mt to 116,797 mt in the week ending December 3rd.

SHFE aluminum prices were neutral in the morning session, and SHFE 1103 aluminum contract prices dipped gradually after opening lower at RMB 16,505/mt, hitting a low of RMB 16,440/mt. SHFE 1103 aluminum contract prices briefly climbed to RMB 16,560/mt in the afternoon as the Shanghai Stock Exchange composite index recovered, but later slipped again at the tail of trading, with prices finally closing at RMB 16,480/mt, down RMB 85/mt. The sluggish transactions caused SHFE aluminum prices to report no obvious fluctuations, and SHFE aluminum prices faced strong resistance at the 60-day moving average, and will unlikely make breakthroughs in the short term.

Aluminum inventories in Shanghai and Nanhai fell rapidly recently due to fewer delivery volumes, but spot aluminum market sentiment remained lackluster given weak aluminum prices and neutral market fundamentals. Traders in east China moved goods actively on December 3rd, and mainstream traded prices slid following falling SHFE aluminum prices, and buyers showed little interest in building stocks ahead of weekend. Actual traded prices were mainly between RMB 16,000-16,030/mt in east China.   

In China’s domestic lead markets, despite losses in LME lead prices in the morning session, market confidence improved to some extent last Friday, given the recently upward trend for LME lead prices, as well as strong base metals markets overnight. In this context, traders raised offers, and transactions in domestic lead markets were made at around RMB 17,200/mt in Shanghai markets. Most downstream producers stayed out of the market, waiting for clearer market outlook; while some others purchased in order to maintain normal production, keeping transactions moderate. Despite rising LME lead prices in the afternoon, no transaction was made due to the approach of weekend.  

Last Friday, SHFE 1103 zinc contract prices opened higher at RMB 18,450/mt tracking LME zinc prices, but moved lower in the morning session. In the midday, SHFE 1103 zinc contract prices dipped to RMB 18,155/mt. In the afternoon, since the US dollar index edged down to 80.09, LME zinc prices rose in response. As a result, SHFE 1103 zinc contract prices pared some losses and finally closed at RMB 18,400/mt, up 1.02%. Trading volumes decreased by 60,000 lots to 1.02 million lots, and total positions decreased by 16,108 lots to 281,334 lots, with long position momentum flat at short position momentum.

In spot markets, downstream buyers purchased modestly, and transactions were mainly made between traders. SHFE zinc prices opened slightly higher tracking LME zinc prices, and fluctuated lower in the morning session, with prices moving below RMB 18,000/mt and once dipping to a low of RMB 17,800/mt. #0 zinc was traded between RMB 17,600-17,650/mt in the morning, with limited purchases reported at RMB 17,650/mt, and with discounts of RMB 600/mt against SHFE 1103 zinc contract prices; #1 zinc was traded between RMB 17,550-17,600/mt. Since SHFE 1103 zinc contract prices fluctuated lower in the morning, and spot discounts remained unchanged around RMB 600/mt, traders were unwilling to purchase due to fluctuating prices. As a result, the transaction was weak in the morning.

SHFE zinc prices rallied boosted by LME zinc prices in the afternoon, with prices hitting a high of RMB 18,480/mt, and spot discounts extended to RMB 680/mt. #0 zinc was traded between RMB 17,700-17,750/mt. Traders purchased more actively in the afternoon, but the overall transaction was still weaker than last Thursday. Although SHFE 1103 zinc contract prices stabilized at RMB 18,000/mt, market players took mixed attitudes towards whether zinc prices would continue rebounding in the following week. As a result, purchase from traders was also limited.

In Shanghai tin markets, mainstream traded prices continued to rise last Friday, boosted by continuously surging LME tin prices overnight. Tin from Gejiu Non-Ferrous Metals Processing Company and Gejiu Zili Metallurgy Company was traded between RMB 158,000-159,000/mt; unknown brand tin was traded between RMB 157,500-158,200/mt. In general, overall trading sentiment was tepid, and weaker from a day earlier. The higher prices dampened downstream producers’ buying interest.

Last Thursday, nickel metal market opened at USD 23,550/mta and closed at USD 23,750/mt, up by USD 61/mt or up by USD 0.26% from a day earlier, with the highest price at USD 24,000/mt and the lowest price at USD 23,450/mt. Daily trading volumes were 2,327 lots and positions were 95,351 lots.

Last Friday, LME nickel market was volatile. LME nickel price opened at USD 23,850/mt and later fell to test USD 23,500/mt, but later rebounded to around USD 23,800/mt. LME nickel inventories were up by 120 mt to 130,908 mt. Last week’s economic data were better than expectation in various countries and the USD dollar slipped late last week, helping support base metal prices to stay at high level. Market attention shifted to CPC Central Committee held on December 3rd, and market focused on fiscal policies to be implemented in China.

In the Shanghai nickel spot market, market players continued to adopt a wait-and-see attitude and didn’t make purchases actively amid volatile price movement. Mainstream traded prices of nickel from Jinchuan Group were between RMB 179,300-179,700/mt, and mainstream traded prices of nickel from Russia were between RMB 178,000-178,500/mt.


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