SMM Daily Review – 2010/12/10 Base Metals Market

SHANGHAI, Dec. 13 (SMM)--

Copper

Depressed by falling LME copper prices overnight, the copper for delivery in three months in the SHFE market opened low at RMB 66,820/mt, and then rallied due to rising LME copper prices and rebounding stocks market. Later, China Customs announced that China’s imports of unwrought copper and copper semis in November soared by more than 20% from October. Supported by the positive data, both LME and SHFE copper prices advanced further. LME copper prices returned above USD 9,000/mt, while SHFE three-month copper contract prices experienced slight increases, with prices generally fluctuating above the daily moving averages for the whole trading day. China’s stocks markets reversed its downward track at 1:30 pm and rose slightly, which pushed up SHFE copper prices, reaching as high as RMB 67,900/mt. However, the resistance at the RMB 68,000/mt mark remained. Finally, SHFE 1103 copper contract prices closed at RMB 67,780/mt, up RMB 310/mt, or a gain of 0.53%. Trading volumes were down 83,200 lots, while positions were up 5,014 lots. Although long positions were dominant, market sentiment remained cautious. LME copper prices hit a new record high recently, but SHFE copper prices failed to touch its previous high level, reflecting market caution before the release of major economic data and macro policies. 

In the spot market, discounts were offered between negative RMB 100-150/mt as SHFE copper market advanced after a low open. Market supply improved from a day earlier, with deals generally done below RMB 66,000/mt. SHFE copper prices rallied to above RMB 66,200/mt after 11:00 am, and spot discounts expanded slightly, with traded prices up to RMB 66,000-66,200/mt. Later, spot traded prices fell back as SHFE copper prices failed to move higher. LME copper prices returned above USD 9,000/mt in the afternoon, and SHFE copper prices rose in response. In this context, spot discounts remained between negative RMB 100-150/mt, and transactions improved slightly on Friday, and traded prices all stood above RMB 66,000/mt, advancing to RMB 66,400/mt from RMB 66,100/mt, with no deals reported at the high-end.

According to data tallied by Shanghai Futures Exchange (SHFE), copper inventories were down 833 mt, and decreases in inventories slowed down, a reflection of low spot consumption and depressed speculation from price gains by RMB 2,000/mt from RMB 64,500/mt to RMB 66,500/mt and tight cash flow at the year’s end. The delivery date is coming next week, and spot discounts are expected to narrow as a result. After the delivery date, the rising trend in the LME copper market is expected to stop (the premiums for cash metal over LME 3-month are now in the decline), and LME copper prices will feel pressure from profit-taking after previous sharp gains. In summary, SMM believes that copper prices will gain at first, and then fall back in the coming week.

Aluminum

SHFE 1103 aluminum contract prices opened significantly lower at RMB 16,325/mt, and the strong buying at the low-end of price range and strengthening Shanghai Stock Exchange composite index helped drive up SHFE aluminum prices gradually, but the sluggish transactions depressed the upward momentum in SHFE aluminum prices, with the highest prices reported at RMB 16,455/mt. SHFE 1103 aluminum contract prices finally closed at RMB 16,450/mt, down 0.18%, and SHFE aluminum was the only one metal closing with declines. Market players were focusing on the upcoming China’s CPI data and relevant departments’ response to current economic conditions. However, SMM believes SHFE aluminum prices will remain weak during the remainder of 2010 due to limited speculation and negative market fundamentals.

Spot aluminum market sentiment was sluggish earlier last Friday, and spot aluminum prices again fell below RMB 16,000/mt, to between RMB 15,960-15,990/mt. Offers quoted by traders remained at a slight premium against SHFE current-month aluminum contract prices. Some suppliers in Zhejiang province were reluctant to move goods, but buyers adopted a wait-and-see attitude, and actions to build up stocks for weekend appeared until in the afternoon when SHFE aluminum prices rallied, keeping market sentiment moderate.

Zinc

Last Friday, SHFE 1103 zinc contract prices opened lower and moved between RMB 18,300-18,350/mt in the morning session. In the midday, the US dollar index fell from 80, boosting LME zinc prices to surge to USD 2,300/mt, and SHFE 1103 zinc contract prices were driven up to RMB 18,500/mt mark. In the afternoon, as the Shanghai Stock Exchange composite index gained to above 2,800 points, SHFE 1103 zinc prices were boosted to break RMB 18,500/mt and finally closed at RMB 18,545/mt, up RMB 105/mt, or up 0.57%. Trading volumes further decreased by nearly 90,000 lots to 557,748 lots, and total positions decreased by 398 lots to 248,882 lots, with short position momentum stronger.

SHFE 1103 zinc contract prices opened lower last Friday and were driven up to RMB 18,500/mt in the morning by the stronger Shanghai Stock Exchange composite index. In spot markets, #0 zinc was traded around RMB 17,900/mt, with discounts of RMB 520-550/mt against SHFE 1103 zinc contract prices. Some imported zinc was traded around RMB 17,820/mt; #1 zinc was traded between RMB 17,800-17,850/mt, and was traded at RMB 17,750/mt when SHFE zinc prices fell in the morning session. Some traders were holding goods waiting for the release of economic data on Saturday. Downstream buyers also took a cautious attitude. As a result, the transaction was weak. Spot discounts of #0 zinc extended to RMB 600/mt when SHFE 1103 zinc contract prices broke RMB 18,500/mt level, but the spot transaction was still lackluster.

Lead

Last Friday, downstream producers in China’s domestic lead markets mainly stayed out of the market at first, due to declines in LME lead prices in the morning session. In the afternoon, some downstream producers entered the market to purchase, possibly due to rising LME lead prices later, or from the need to replenish raw materials inventories on the weekend. In this context, trading sentiment improved slightly. Traders kept low-end prices firm, but cut high-end prices moderately, with mainstream traded prices between RMB 17,100-17,180/mt.

Tin

Last Friday, overall trading sentiment was sluggish in Shanghai tin markets, with high traded prices and limited trading volumes. Mainstream traded prices were between RMB 160,000-160,500/mt, and main brands traded in markets were Kaiyuan, Xiangxi, Jinxing, Jinhai etc. Downstream producers held stronger wait-and-see sentiment in view of rapid gains in domestic tin prices last week, keeping transactions tepid. Rumors about China’s interest rate increases grew last weekend, and Market players are waiting for final decisions about the possible tight monetary policies from China’s Central Government. Domestic tin markets will have clearer price guides this week.

Nickel 

According to data from the US Department of Commerce, wholesale inventories in October were up by 1.9% MoM, higher than estimation of a 0.9% MoM growth. The US jobless claim in the week ending on December 4 slipped to 421,000, lower than estimation of 425,000. Boosted by upbeat economic data, LME nickel market opened at USD 23,550/mt last Friday, and climbed as high as USD 23,755/mt. LME nickel prices stayed above USD 24,652/mt for most of the time during the Asian trading hours, but later fell to test USD 23,410/mt when the US dollar climbed from 79.86 to 80.063 at around 3:00 pm. LME nickel inventories last Friday were down by 12 mt to 131,184 mt.

In the Shanghai nickel spot market, transactions were brisk among traders. Mainstream traded prices of nickel from Jinchuan Group were RMB 178,500/mt in the morning trading session and RMB 179,000/mt in the afternoon trading session, while mainstream traded prices of nickel from Russia were between RMB 177,000-177,500/mt. Downstream purchases are still mainly from electroplating industry, while purchases from stainless steel mills were sparse. Market focused on economic data that would be released on Saturday as well as news on interest rate hike.

Copyright © SMM. All Rights Reserved

None of this material may be used for any commercial or public use in any forms or means, without the prior written consent of SMM. For reproduction issue, please contact us by email: service.en@smm.cn