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SMM Daily Review – 2010/3/1 Base Metals Market
Mar 2,2011 09:24CST
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SHANGHAI, Mar. 2 (SMM)--

Supported by positive movements in the LME copper market, SHFE 1105 copper contract prices, the most active one, opened up RMB 670/mt at RMB 74,320/mt on Tuesday. The copper for delivery in three months in the SHFE market moved lower after a high open. SHFE three-month copper contract prices briefly reached RMB 74,540/mt in earlier session, but then felt downward pressure at the moving averages, sliding to RMB 73,700/mt. At the tail of the trading, SHFE 1105 copper contract prices were supported by rallying LME copper prices from a lower US dollar index, with prices finally closing at RMB 74,000/mt, up RMB 350/mt, or a gain of 0.48%. Positions for SHFE three-month copper contract prices were down 4,248 lots to 173,280 lots, and trading volumes were down 30,864 lots to 128,618 lots. Both positions and trading volumes were down for SHFE 1105 copper contract prices, and market attention was now shifting to SHFE 1106 copper contract prices. Before the NPC and CPPCC meetings, speculators generally take a cautious attitude. Although SHFE three-month copper contract prices closed at RMB 74,000/mt, and with support available at RMB 72,500/mt, any further rising momentum is limited. SMM believes that SHFE three-month copper prices will continue to fluctuate at high levels, and consolidate its support between RMB 74,000-74,500/mt.

In the spot market, discounts were offered between negative RMB 450-350/mt in the morning business during the major spot trading hours. After 11:00 am when copper futures prices fell, spot discounts narrowed slightly to negative RMB 420-300/mt, and traders were active in purchases due to price declines in the midday. Traded prices for standard-quality copper were between RMB 72,650-72,850/mt, and negative RMB 72,700-73,000/mt for high-quality copper in the morning business. SHFE copper prices fell further in the afternoon session, and spot discounts were in the negative RMB 420-350/mt range. Traded prices for standard-quality copper were between RMB 72,600-72,800/mt, and RMB 72,700-72,900/mt for high-quality copper. However, market acceptance was low when prices climbed above RMB 73,000/mt. The overall trading sentiment was lower compared with the previous two trading days. Especially for downstream producers, which replenished goods for third straight days, they still preferred to make purchases at lower prices.

As LME aluminum prices closed at a high of USD 2,600/mt overnight, SHFE 1105 aluminum contract prices opened slightly higher at RMB 17,155/mt. Although the Shanghai Stock Exchange composite index held steady at 2,900 points, SHFE 1105 aluminum contract prices kept falling due to weak market fundamentals, with prices moving below the daily moving average. At the tail of trading, SHFE 1105 aluminum contract prices even fell below RMB 17,000/mt, and finally closed at a low of RMB 16,990/mt, down RMB 120/mt compared with the previous trading day, or down 0.7%. Trading volumes of SHFE 1105 aluminum contract were 33,716 lots, and total positions increased by 12,256 lots. Positions of SHFE 1106 aluminum contract increased more significantly than those of SHFE 1105 aluminum contract, indicating more speculative funds flowed into SHFE 1106 aluminum contract. SHFE aluminum prices were weaker than other base metals prices on Tuesday due to high spot aluminum inventories and weak downstream consumption, and SMM predicts SHFE aluminum prices will find support at RMB 17,000/mt in the short term.

Traded prices for spot aluminum in east China were between RMB 16,640-16,680/mt, with discounts of RMB 120-150/mt against SHFE current-month aluminum contract prices. The weakening SHFE aluminum prices and low buying interest weighed down spot aluminum prices, and mainstream traded prices for spot aluminum fell gradually. Some traders were unwilling to move goods at lower prices, and the wait-and-see sentiment became stronger, keeping overall market sentiment sluggish. Spot aluminum prices in south China continued to fall slightly, with traded prices moving between RMB 16,650-16,670/mt. Some downstream processors and middlemen made purchases aggressively at lower prices, but traders were reluctant to move goods in anticipation of stronger consumption in the future, and they kept offers firm. As a result, overall trading sentiment was muted.  

On Tuesday, SHFE 1105 zinc contract prices opened at a daily high of RMB 19,485/mt and fell after opening, with prices falling to a daily low of RMB 19,245/mt in the midday. In the afternoon, LME zinc prices rebounded as a result of the weakening US dollar index, boosting SHFE zinc prices to rally, but with prices closing with declines at RMB 19,315/mt, touching the 60-day moving average. Total positions of SHFE 1105 zinc contract continued to decrease by 13,634 lots to 268,824 lots, and trading volumes decreased by over 130,000 lots to 345,786 lots. SHFE 1106 zinc contract became more actively traded, with total positions increasing by 8,622 lots to 62,192 lots.

In spot markets, spot zinc prices fell along with SHFE zinc prices, with discounts remaining between RMB 600-650/mt against SHFE 1105 zinc contract prices. #0 zinc was traded between RMB 18,750-18,700/mt in the morning session, and fell to RMB 18,650/mt in the midday in response of the falling SHFE zinc prices. #1 zinc was traded between RMB 18,600-18,650/mt. Transactions were weak, with the market adopting a wait-and-see attitude and unwilling to sell goods. In the midday, SHFE zinc prices rallied to RMB 19,300-19,400/mt, and spot discounts were around RMB 600/mt. #0 zinc was traded between RMB 18,700-18,750/mt. But transactions did not improve.

In China’s domestic lead markets, traders’ interest boosted by the lead futures market launching last week faded on Tuesday, due to fluctuating LME lead prices. Some downstream producers were cautious, largely purchasing on an as-needed basis, with overall trading sentiment lower from a week earlier. However, most lead smelters still restricted sales in anticipation of the lead futures market, and insisted on firm offers with low selling interest. Transactions for lead from Gejiu, Yunnan province were made between RMB 17,300-17,350/mt, and well-known branded lead traded between RMB 17,550-17,600/mt, with traded prices flat with a day earlier.

In Shanghai tin markets, trading sentiment was quiet on Tuesday, but mainstream prices were up, with tin from Yunnan Tin Group, Gejiu Zili Metallurgy Company and Jinhai tin traded between RMB 200,000-201,500/mt, and some minor branded tin between RMB 197,000-198,000/mt. Tin smelters were unwilling to move goods, so traders had limited stocks on hand, strongly supporting domestic tin prices. However, downstream producers were still purchasing on an as-needed basis, keeping trading sentiment muted. In response, domestic tin prices were trapped in a deadlock. 
LME nickel prices opened at USD 28,200/mt and closed at USD 28,975/mt on February 28th, up by USD 785/mt from a day earlier, with the highest price at USD 29,050/mt and the lowest price at USD 28,018/mt. Daily trading volumes were 2,767 lots and positions were 102,101 lots. Positive US economic data released on February 28 helped eased market concern over negative impact on global economy from crude oil price surge. However, China's PMI released on March 1 fell to a 7-month low, dampening market sentiment. LME nickel prices largely moved below USD 29,000/mt after opening at USD 29,000/mt during the Asian trading hours on March 1, but later advanced to reach the highest at USD 29,170/mt. LME nickel inventories were up by 498 mt to 130,578 mt.                 

In the Shanghai nickel spot market, overall trading sentiment was moderate. LME nickel price surge on February 28 boosted market sentiment, but transactions were still cautious, with few deals made at high offers. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 215,500-215,800/mt range, and mainstream traded prices of nickel from Russia were in the RMB 214,300-214,700/mt range. Market supply and transactions were dominated by imported nickel from Russia, with few transactions made at RMB 216,000/mt. Price hike curbed downstream demand, with transactions largely made between traders.


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