SMM Daily Review – 2010/3/2 Base Metals Market

SHANGHAI, Mar. 3 (SMM)--

Copper:
SHFE 1105 copper contract prices, the most active one, fluctuated wildly in the morning session after a low open on Wednesday, but rallied from lows all the way at the midday. The copper for delivery in three months opened low at RMB 73,820/mt, and failed to reach RMB 74,150/mt during the first session in the morning. During the second session in the morning, SHFE three-month copper contract prices fell rapidly to RMB 73,680/mt, as China's Shanghai composite index lost 2,900 points, but then rallied due to buying activity at low levels. Until the afternoon session, SHFE three-month copper contract prices kept rallying along with rising LME copper prices and the returning of 2,900 points of China's stocks prices, reaching as high as RMB 74,790/mt at the tail of the trading. Finally, SHFE 1105 copper contract prices closed at RMB 74,700/mt, up RMB 640/mt, or a gain of 0.86%. Positions for SHFE three-month copper contract prices were up 10,176 lots to 183,456 lots, and trading volumes grew to 162,752 lots. SHFE copper market closed higher, and long players returned to the market, leaving further price rallies possible.

In the spot market, discounts were offered between negative RMB 350-380/mt in the morning business. Market selling interest was strong, but purchasing activity was sparse. During the major spot trading hours, SHFE copper market slid rapidly, with SHFE current-month copper contract prices briefly moving at around RMB 73,000/mt, and middlemen were active in the market due to low prices. After 11:00 am, spot discounts narrowed slightly to negative RMB 320-350/mt for high-quality copper.  Supply of standard-quality copper was limited, and offers were firm as a result, with the price difference between high-quality and standard-quality copper only at RMB 50/mt. Spot discounts for hydro-copper narrowed within negative RMB 500/mt.  Traded prices for standard-quality copper were between RMB 72,600-72,850/mt, and negative RMB 72,700-73,000/mt for high-quality copper in the morning business. Trading sentiment improved, but mainly between middlemen. Downstream producers returned to the sidelines after purchases at low levels in the previous days, mainly consuming the newly-purchased stocks. Copper futures prices continued to rally in the afternoon session, and market was dominated by long sentiment, with prices up RMB 600/mt from morning levels. Traded prices in the spot market also rose, breaking RMB 73,000/mt. Traded prices for standard-quality copper stood at RMB 73,000/mt, with the high-end reported at RMB 73,200/mt. Deals for high-quality copper were made between RMB 73,100-73,300/mt, up RMB 300-500/mt from morning levels. As the price difference between SHFE near-term and forward month contracts increased in the afternoon, spot discounts expanded to around negative RMB 400/mt, and so arbitragers entered the market again, with arbitrage trading dominating market transactions. Market supply reduced in recent days. If SHFE three-month copper contract prices return RMB 75,000/mt, spot consumption at RMB 73,500/mt will be depressed further. The road for domestic spot prices to rally will be uneven, as unsteady performance of China's Shanghai composite index at 2,900 points will continue to affect investor confidence.

Aluminum:    
SHFE aluminum prices remained weak on Wednesday, and SHFE 1105 aluminum contract prices fell rapidly and kept fluctuating below RMB 17,000/mt after opening slightly lower at RMB 17,050/mt. SHFE 1105 aluminum contract prices hit an intraday low of RMB 16,925/mt, and finally closed at RMB 16,990/mt, down RMB 65/mt compared with the previous trading day, or down 0.38%. Trading volumes of SHFE 1105 aluminum contract were 26,342 lots, and total positions increased by 1,772 lots. SHFE aluminum prices opened low and moved lower on Wednesday, and the advancing SHFE copper prices in the afternoon session failed to drive up SHFE aluminum prices. Sluggish spot aluminum consumption caused weak market transactions, and positions of SHFE 1105 aluminum contract declined by 2,348 lots, and SMM predicts SHFE 1105 aluminum contract prices will test the resistance at RMB 17,000/mt in the short term.

Traded prices for spot aluminum in east China were between RMB 16,580-16,610/mt, with discounts of RMB 90-120/mt against SHFE current-month aluminum contract prices. As SHFE aluminum prices opened low and moved lower, spot aluminum prices fell in response and even fell below RMB 16,600/mt. Downstream buying interest failed to improve significantly, while traders were less willing to move goods, and they preferred to take a wait-and-see attitude if their financial conditions permit, since they believe spot aluminum prices would find support at RMB 16,500/mt. In this context, the wait-and-see sentiment dominated market players, and overall trading sentiment was extremely sluggish. Spot aluminum prices in south China fell further as well, with traded prices between RMB 16,630-16,650/mt. However, downstream processors and middlemen purchased goods actively at lower prices, and traders were also moving goods aggressively, with mainstream offers climbing gradually as well. As a result, overall market trading sentiment in south China was brisk.

Zinc:
On Wednesday, SHFE 1105 zinc contract prices moved between RMB 19,100-19,200/mt in the morning session, and fell to RMB 19,000/mt dragged down by the Shanghai Stock Exchange composite index and LME zinc prices. Later, SHFE 1105 zinc contract prices rallied to RMB 19,200-19,300/mt and finally closed at RMB 19,235/mt, down RMB 135/mt, or down 0.7%, below all the moving averages. Total positions of SHFE 1105 zinc contract decreased by 10,064 lots to 258,760 lots, and trading volumes increased by over 40,000 lots to 385,810 lots. Total positions of SHFE 1106 zinc contract increased slightly by 6,974 lots to 69,166 lots, implying larger volumes of cash flows towards copper.

SHFE 1105 zinc contract prices moved between RMB 19,100-19,200/mt on Wednesday, and spot transactions were weak. Discounts of #0 zinc were RMB 600/mt against SHFE 1105 zinc contract prices, with traded prices RMB 18,550/mt. Spot zinc prices fell to RMB 18,500/mt as SHFE 1105 zinc contract prices slid to RMB 19,000/mt in the midday, with discounts narrowing to RMB 550/mt. #1 zinc was traded between RMB 18,400-18,450/mt. The overall trading sentiment was weak, with smelters unwilling to sell goods. Downstream buyers purchased modestly at lower prices as arbitragers were aggressively moving goods at narrowed discounts. But transactions were still quiet. SHFE zinc prices rallied to RMB 19,200-19,300/mt in the afternoon, and spot discounts remained at RMB 600/mt, with spot transactions lackluster.

Lead:
On Wednesday in China’s domestic lead markets, traders’ sentiment was down from last week due to the weak LME lead market. Most downstream producers were pessimistic about market outlook, only purchasing on an as-needed basis. In general, trading sentiment was muted. Transactions for lead from Gejiu, Yunnan province were made at around RMB 17,300/mt, and well-known branded lead traded between RMB 17,550-17,600/mt. Lead smelters showed mixed views on sales: some small smelters in Henan and Yunnan provinces were moving goods normally amid capital pressures, and due to weak LME lead prices from Libyan unrest; smelters in Anhui and Guangxi provinces were unwilling to move goods, waiting for higher prices after opening of China’s lead futures market.  

Tin:
On Wednesday in Shanghai tin markets, low-priced goods were limited supported by short market supply. Tin from Yunnan Tin Group, Gejiu Zili Metallurgy Company and Jinhai, Nanshan, as well as Kaiyuan branded tin traded between RMB 200,000-202,000/mt. Some transactions were made at RMB 199,500/mt in the morning, but then traded prices rose constantly. Low-end prices moved up from a day earlier, but high-end prices kept unchanged due to sluggish transactions. LME tin prices were fluctuating at high prices recently, with weaker upward momentum. In response, wait-and-see sentiment escalated in domestic tin markets, with traded prices narrowly fluctuatin
 
Nickel:
LME nickel futures contract for delivery in three months opened at USD 29,000/mt and closed at USD 28,775/mt on March 1, down by USD 200/mt from a day earlier, with the highest price at USD 29,220/mt and the lowest price at USD 28,658/mt. Daily trading volumes were 2,618 lots and positions were 102,469 lots. LME nickel prices largely fluctuated narrowly after opening at USD 28,800/mt during the Asian trading hours on March 2, and slipped sharply to the lowest at USD 28,460/mt later. LME nickel inventories were down by 162 mt to 130,416 mt.                

In the Shanghai nickel spot market, buying interest from traders and downstream consumers was both weak and transactions were sluggish. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 215,000-215,500/mt range, and mainstream traded prices of nickel from Russia were around RMB 214,000/mt. Transactions were still dominated by nickel from Russia, as traders holding Jinchuan nickel were reluctant to move goods given that current market price for Jinchuan nickel were lower than Jinchuan's ex-works nickel prices. LME nickel prices remained volatile without clear trend at present, and wait-and-see sentiment was growing in the market.

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