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

SHANGHAI, Mar. 4 (SMM)--

Copper:
Supported by positive movements in the LME copper market, SHFE 1105 copper contract prices, the most active one, opened up RMB 370/mt at RMB 74,550/mt on Thursday. After a high open, the copper for delivery in three months in the SHFE market moved higher, with prices reaching RMB 74,880/mt during the major spot trading hours. In the afternoon session, SHFE three-month copper contract prices slid below RMB 74,000/mt after China's Shanghai composite index fell to 2,900 points, down as low as RMB 73,860/mt, leaving the gap between the high and low-end at RMB 1,020/mt. At the tail of the trading, SHFE 1105 copper contract prices closed at RMB 74,140/mt, down RMB 40/mt, or a loss of 0.05%. Positions for SHFE three-month copper contract prices were down 12,706 lots to 170,750 lots, and trading volumes were down 28,298 lots to 134,454 lots. With the withdrawal by longs, SHFE three-month copper prices will continue to meet resistance at RMB 75,000/mt. SHFE copper market is expected to keep fluctuating at high levels in the short term.

In the spot market, discounts were offered between negative RMB 400-300/mt during the earlier spot trading hours, as SHFE copper market advanced further after a high open. With falling supply, the price difference between standard-quality and high-quality copper was only around RMB 50/mt. After 11:00 am, copper prices in the SHFE market gained, but market supply was limited, and the price gap between SHFE current-month and three-month copper contract prices expanded to RMB 1,000/mt, increasing arbitrage trades. Hence, trading sentiment improved. Spot discounts narrowed to negative RMB 380-280/mt. Traded prices for standard-quality copper were between RMB 73,300-73,400/mt, and RMB 73,350-73,450/mt for high-quality copper in the morning business. As SHFE copper prices dropped in the afternoon session, spot discounts narrowed further. Discounts for high-quality copper were at negative RMB 250/mt, and negative RMB 300/mt for high-quality copper. Trading sentiment waned in the afternoon business compared with morning levels. Traded prices for standard-quality copper fell to RMB 73,000-73,250/mt, and RMB 73,100-73,300/mt for high-quality copper, holding firm at RMB 73,000/mt. Transactions were mainly done by traders and arbitragers on Thursday, and downstream producers remained on the sidelines.

Aluminum:    
SHFE 1105 aluminum contract prices opened flat at RMB 16,975/mt on Thursday, and later climbed to RMB 17,030/mt in the morning session following SHFE zinc prices. Later, SHFE 1105 aluminum contract prices fluctuated lower dragged down by weak market fundamentals, and finally closed at RMB 16,945/mt, down RMB 30/mt compared with the previous trading day, or down 0.18%. Trading volumes of SHFE 1105 aluminum contract were 19,028 lots, and total positions increased by 4,082 lots. SHFE aluminum prices rose first but fell later, with prices falling below the 5-day and 60-day moving averages due to weak market transactions. SMM predicts SHFE 1105 aluminum contract prices will face strong resistance at RMB 17,000/mt in the short term.

Traded prices for spot aluminum in east China were between RMB 16,600-16,640/mt, with discounts of RMB 80-100/mt against SHFE current-month aluminum contract prices. SHFE current-month aluminum contract prices climbed slightly in the morning session, driving up spot aluminum prices. Middlemen purchased goods aggressively at lower prices, but downstream processors were cautious toward purchases. Spot supplies were sufficient, and spot aluminum prices found support at RMB 16,600/mt, with overall market sentiment improving from a day earlier. CHALCO announced on Thursday to raise alumina spot offer to RMB 3,000/mt, up RMB 100/mt or 3.45% from the previous RMB 2,900/mt. CHALCO's increases in spot offer for alumina which makes up the largest proportion in aluminum production costs will significantly drive up spot aluminum costs, and will also provide some support for recently weakening aluminum prices.

Zinc:
On Thursday, SHFE 1105 zinc contract prices opened at RMB 19,185/mt, and rose to RMB 19,350-19,400/mt in the morning session, with prices touching a daily high of RMB 19,445/mt in the midday. Later, SHFE 1105 zinc contract prices lost previous gains dragged down by LME zinc prices and the Shanghai Stock Exchange composite index, with prices finally closing at RMB 19,120/mt, down RMB 50/mt, or down 0.26%, with prices below all the moving averages but finding support at RMB 19,000/mt.Total positions of SHFE 1105 zinc contract increased slightly by 138 lots to 258,898 lots. and trading volumes decreased by nearly 7,000 lots to 372,070 lots. Total positions of SHFE 1106 zinc contract increased by 5,780 lots to 74,946 lots, and trading volumes decreased by nearly 3000 lots to 57732 lots. The overall trading sentiment was weak.

In spot markets, spot zinc prices rose along with SHFE 1105 zinc contract prices. #0 zinc was traded between RMB 18,700-18,750/mt in the morning session, with discounts of RMB 600-650/mt against SHFE 1105 zinc contract prices. Spot discounts were around RMB 600/mt when SHFE 1105 zinc contract prices rose to 19,350-19,400/mt. #0 zinc prices surged to RMB 18,750/mt, and even as much as RMB 18,800/mt, but with transactions limited at the high end. Downstream buying interest was low, with spot transactions mainly made between traders. SHFE 1105 zinc contract prices slumped in the afternoon, causing spot discounts to narrow to RMB 550/mt. #0 zinc was traded around RMB 18,600/mt, but with transactions even weaker.

Lead:
On Thursday in China’s domestic lead markets, producers of lead from Gejiu, Yunnan province cut sales, amid rising stock prices and other metal prices, and with anticipations of the lead futures market, despite a weak LME lead market in the morning. Besides, well-known branded lead prices are high recently, so some downstream producers prefer to buy lead from Gejiu, Yunnan province. In response, market supply of lead from Gejiu, Yunnan province reduced, leading to higher prices. Lead from Gejiu, Yunnan province traded at around RMB 17,400/mt, and well-known branded lead between RMB 17,550-17,600/mt. At present, environmental protection inspections have been conducted at lead-related companies in Anhui, Shandong and Hebei provinces, negatively affecting operation at secondary lead smelters and battery producers in these areas. Hence, overall consumption is weak, and transactions are muted.

Tin:
On Thursday in Shanghai tin markets, traded prices kept stable, with tin from Yunnan Tin Group, Gejiu Zili Metallurgy Company, and some minor branded tin traded between RMB 200,000-202,000/mt. Trading sentiment remained quiet amid unclear direction in the LME tin market, triggering escalating wait-and-see sentiment in the markets. Downstream producers were still purchasing on an as-needed basis; market supply was limited amid smelters’ unwillingness to move goods, supporting domestic tin spot prices. 
 
Nickel:
LME nickel futures contract for delivery in three months opened at USD 28,800/mt and closed at USD 28,600/mt on March 2, down by USD 175/mt from a day earlier, with the highest price at USD 28,900/mt and the lowest price at USD 28,260/mt. Daily trading volumes were 2,101 lots and positions were 104,236 lots.  LME nickel futures contract for delivery in three months opened at USD 28,600/mt on March 3, and fluctuated narrowly during the Asian trading hours. Trading sentiment was relatively cautious, as market focused on the latest development of the Middle East unrest and China's NPC and CPPCC. LME nickel inventories were down by 402 mt to 130,014 mt.                 

Supported by slight rally of LME nickel prices, traded prices in the Shanghai nickel spot market also advanced. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 215,500-215,500/mt range, and mainstream traded prices of nickel from Russia were in the RMB 213,500-214,300/mt range. Prices were relatively low in the morning trading session, but gradually rallied later. Transactions were moderate, and were largely done between traders. Relatively lower prices in the morning trading hours were well received, but transactions became fewer in the afternoon trading hours when prices rallied.  Transactions were still dominated by nickel from Russia.

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