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SMM Daily Review - 2010/3/11 Base Metals Market 

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SHANGHAI, Mar. 12 (SMM)&nbsp;--&nbsp; 
Copper 
On Thursday, SHFE copper market fell from higher CPI data. SHFE June delivery copper contract dropped below RMB 60,000/mt, hitting as low as RMB 59,200/mt, with prices closing at RMB 59,310/mt, down 2.05% from a day earlier. Positions for the most active contract on the SHFE market increased by more than 7,700 lots. SHFE current month copper contract weakened below RMB 59,000/mt, falling as low as RMB 58,700/mt, with prices ending at RMB 58,760/mt.
In spot copper market, spot discounts narrowed further to around negative RMB 100/mt following the upcoming delivery date. Discounts for domestic high-quality copper fell to negative RMB 50 -80/mt due to falling copper prices on the SHFE market, with deals made in the RMB 58,750-58,900/mt range. Discounts for standard-quality copper narrowed from negative RMB 150/mt to RMB 100/mt, and transactions were made between RMB 58,700-58,750/mt, with strong unwillingness to move goods. However, downstream producers showed no positive response to price corrections, preferring to buying goods on an as-needed basis. Hence, overall trading sentiment was low.&nbsp;
Aluminum 
SHFE aluminum prices opened low and moved lower, and SHFE 1006 aluminum contract prices opened at RMB 16,980/mt, but later slipped to RMB 16,860/mt negatively affected by China&rsquo;s CPI data. SHFE 1006 aluminum contract prices regained some lost ground in the afternoon, but still had trouble breaking through the RMB 17,000/mt mark, with prices finally closing at RMB 16,900/mt, down 0.88%, and positions declined by 4,144 lots. SHFE spot-month aluminum contract prices faced pressure at RMB 16,500/mt, with prices mainly moving in the RMB 16,400-16,480/mt range.
In the spot market, spot aluminum prices fell at a slower pace, with discounts at RMB 150/mt. Cargo-holders were reluctant to sell goods, and aluminum prices received pressure below RMB 16,300/mt, with traded prices at RMB 16,270/mt. However, aluminum prices tried to stabilize at RMB 16,300/mt when SHFE aluminum prices regained in the afternoon. Aluminum prices were mainly supported by costs, with downward room expected to be limited.
Zinc 
SHFE zinc prices moved lower after opening low, since China's CPI rose by 2.7% on a yearly basis, triggering market concerns over the monetary tightening. SHFE 1006 zinc contract prices gradually fell from RMB 19,200/mt to RMB 18,800/mt, and more short players closed positions at lower prices, and SHFE 1006 zinc contract prices closed at RMB 18,870/mt finally, down 2.4%.
In the spot market, spot discounts narrowed to RMB 700/mt against SHFE 1006 zinc contract yesterday due to falling SHFE zinc prices after discounts remained at RMB 900/mt for three consecutive days, and downstream inquiries seemed to increase, but purchasing volumes were limited. Downstream consumers were waiting for further declines in zinc prices, with prices lower than RMB 18,000/mt expected to be ideal purchasing prices, so the wait-and-see sentiment still dominated the market. Yesterday, #0 zinc was traded between RMB 18,120-18,180/mt, while #1 zinc was traded at RMB 18,100/mt. SHFE 1006 zinc contract prices will test the RMB 18,500/mt mark as the weekend nears, which will have effect on downstream purchase interest.
Lead 
China's CPI in February was higher than expected, at 2.7%. Market concerns that China may resort to monetary tightening weighed down base metals prices, adding market pessimism. Hence, market transactions remained depressed, despite of price declines. Transactions in the Shanghai market were done in the RMB 15,700-15,800/mt range.
 
Tin 
On March 10th, LME tin prices opened low at USD 17,525/mt and were depressed after climbing to test USD 17,800/mt, with prices closing at USD 17,650/mt, slightly up USD 50/mt. On March 11th, LME tin prices opened flat at USD 17,650/mt, and had already fallen below 5-day moving average at 17:00 in the afternoon session along with decline of other metal prices, and faced challenges again at USD 17,300/mt.
Slight increase of LME tin prices still supported offers from domestic tin producers, and offers were still firm due to tight supply of domestic tin ore. In addition, most smelters didn&rsquo;t actively make purchases and maintain production in a large amount due to current sluggish market conditions, and controlled supply of goods in order to prevent prices from falling. It was reported that there was not much supply of major brand product from traders in the Shanghai market, and it was not easy to move goods at prices as high as RMB 141,500-142,000/mt. On March 11th, arrivals of unknown brand tin to Shanghai market increased with prices below RMB 140,000/mt due to sluggish transactions. Currently, wait-and-see sentiment was strong not only among upstream producers and downstream consumers but among traders as well, and the overall market sentiment stagnated.
Nickel 
On March 10th, LME three month nickel contract prices closed at USD 21,450/mt, down USD 870/mt, the sharpest daily decline since October 2008 and dampening market sentiment. LME nickel prices opened at USD 21,500/mt on March 12th, and fluctuated to decline slightly. In the afternoon session, LME nickel prices rebounded slightly after falling to test USD 21,050/mt, with strong pessimistic sentiment in the market.
In the Shanghai nickel market, overall trading sentiment was still moderate, and transactions were mainly made among traders to seek arbitrage. Around 1000 mt of low-priced supply of goods from other regions flowed in to Shanghai market this week, exerting pressure on spot market. Quite few end users entered the market to make purchase, and supply of goods was sufficient. Traded prices of imported nickel were in the RMB 156,500-157,000/mt range, and traded prices of nickel from Jinchuan Group were in the RMB 157,000-158,000/mt range.
 
To contact the writer on this report: <a href="mailto:angelawang@smm.cn">angelawang@smm.cn</a>
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SMM Daily Review - 2010/3/11 Base Metals Market

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