SMM Daily Review - 2010/5/10 Base Metals Market

SHANGHAI, May 11 (SMM) --

Copper
On Morning, SHFE copper market opened high following rising LME copper prices, but price gains were curbed by falling China’s A-shares market in the morning. In the afternoon business, SHFE copper prices rallied all the way due to strong price rebounds on LME copper market, and finally closed at a daily high.

The August delivery copper contract, the most active one on the SHFE market fell as low as RMB 55,660/mt along with dropping equities market in the midday after opening at RMB 56,020/mt, but rose above RMB 56,500/mt in the afternoon trade, and finally closed at RMB 56,720/mt, a gain of 3.02%, up RMB 1,660/mt. Positions for SHFE August delivery copper fell by 10,740 lots, with turnover rate at 266.59%, and total positions exceeded 200,000 lots, up to 201,300 lots, and trading value topped RMB 150.6 billion, a sign of brisk trading sentiment. Positions and trading volume for SHFE September delivery copper is gradually increasing following the approach of delivery data for May. Positions for the September delivery copper on the SHFE market grew 12,094 lots, an indication of strong long positions having been built at low levels. The low-end and high-end for SHFE current-month copper prices was RMB 55,520/mt and RMB 56,550/mt, respectively, and finally ended at a session high. Price spread was little among nearby-month copper contracts, and forward-month copper prices were mainly around RMB 56,900/mt, leaving no opportunities for arbitragers. SMM believes SHFE copper prices are expected to advance above the 5-day moving average on Tuesday following support from LME copper market.

In the spot market, premiums were between positive RMB 50-150/mt in the morning business, and a brief price decline on the SHFE copper market helped spot premiums rise to positive RMB 80-180/mt. Transactions in the morning were generally done in the RMB 55,750-55,950/mt range. In the afternoon trade, spot premiums returned to positive RMB 100-150/mt along with price rebounds on the SHFE copper market, helping copper prices advance to the RMB 56,200-57,000/mt range.

On Monday, the SHFE/LME copper price ratio felt pressure at 7.9, reducing selling interest among suppliers of imported goods. Falling stocks market in the morning depressed downstream buying interest as well, leaving cautious purchases. Transactions in the afternoon improved, since market confidence was buoyed by rapid price gains to USD 7,150/mt on the LME copper market. However, cargo-holders were reluctant to sell products.

Market players generally believe copper prices will technically rebound in the short term, and China will release major economic data soon, and expectations of higher interest rates remain. The macro-economic policies both in China and abroad remain uncertainties on base metals market, and particular attentions should be adopted. 

Aluminum
SHFE aluminum prices opened flat at RMB 15,675/mt on May 10th, but later dropped in the morning, with the lowest prices reported at RMB 15,560/mt. The announcement of emergency aid for Greece helped push up LME aluminum prices in the afternoon, allowing SHFE aluminum prices to advance to as high as RMB 15,725/mt, and finally SHFE aluminum prices closed at RMB 15,720/mt, up RMB 150/mt compared with the previous trading day, or up 0.96%. Total positions increased by 1,236 lots to 293,008 lots, and trading volumes were 123,004 lots.

In the spot markets, spot deals were made below RMB 16,300/mt in the morning in east China, with slight premium against SHFE current-month aluminum contract prices, but later spot traded prices moved higher all the way in the afternoon following rising SHFE aluminum prices, with offers quoted by traders in south China at RMB 16,500/mt, and overall trading sentiment was relatively bullish. Base metal price trends have been closely related with the debt crisis in Euro zone recently, and special attention should be paid to the announcement of the economic data in Europe last night (May 10th), as well as the US dollar index trends.   

Lead
Trading sentiment in domestic lead markets fell on Monday. Few downstream producers entered the market for purchases following slight increases in prices, as many downstream producers purchased low-priced goods a week ago. Domestic lead smelters maintained offers at RMB 15,400-15,500/mt, and goods in the market were mainly from traders. However, traders became unwilling to sell products as well along with stabilizing LME lead prices in the afternoon business. Deals in the Shanghai market were largely traded in the RMB 15,100-15,250/mt range. Favorable performance on the LME lead market in recent two days strengthened market sentiment.

Zinc
SHFE zinc prices fluctuated widely on May 10th, and SHFE zinc prices fell rapidly following domestic A-shares market trends after opening, with prices declining by RMB 190/mt to RMB 16,780/mt, but later SHFE zinc prices rebounded at noon as LME zinc prices stabilized, with SHFE 1008 zinc contract prices finally ending at RMB 17,160/mt. Trading volumes set a three-month high given wild fluctuations in SHFE zinc prices, and transactions were brisk when zinc prices were low, an indication of strong support received by SHFE three-month zinc contract prices at RMB 16,800/mt.

In the spot markets, spot discounts for #0 zinc expanded from RMB 330-350/mt in the morning to RMB 370-400/mt in the afternoon against SHFE 1007 zinc contract prices, with traded prices mainly moving between RMB 16,350-16,550/mt, and the significant fluctuations in SHFE zinc prices intensified market views on future zinc prices. However, the pessimism was still stronger in the market, and most market players still adopted a wait-and-see attitude. In general, zinc prices always find solid support below RMB 17,000/mt, so the stabilization of zinc prices will mainly depend on the stabilization of LME zinc prices, and the withdrawal of short positions from copper, zinc, and other metals markets. 

Tin
LME tin prices closed at USD 17,602/mt last Friday, up USD 2/mt from a day earlier, with highest price at USD 17,725/mt and lowest price at USD 17,000/mt. Daily trading volumes were 401 lots and positions were 19,491 lots. On May 10th, LME tin prices advanced after a high open at USD 17,700/mt, and climbed as high as USD 18,100/mt. Base metal prices all advanced on May 10th, as European policy makers adopted measures to ease the credit crisis in the euro zone. The Federal Reserve said it would restart the emergency currency swap tool to help prevent sovereign debt crises in Europe from extending to other markets.

In the Shanghai tin spot market, prices remained flat with last Friday, with mainstream traded prices of major brand tin between RMB 143,000-144,000/mt and unknown brand tin between RMB 142,000-143,000/mt. Trading volumes increased slightly compared with those on last Friday, which is mainly from normal purchases for production use by downstream companies that hadn’t entered the market last week. The European debt crisis eased to certain extent, and domestic spot prices are expected to remain largely stable if LME tin prices can stay stale after declining. 

Nickel
LME nickel prices opened at USD 21,800/mt and closes at USD 22,301/mt, with highest price at USD 22,750/mt and lowest price at USD 21,150/mt. Daily trading volumes were 2,438 lots and positions were 95,680 lots. As debt crisis in Greece eased to certain extent and the rebound of euro supported prices, LME nickel prices opened at USD 22,500/mt on May 10th  and fluctuated narrowly on upward track to USD 23,630/mt, with prices rebounding technically by more than USD 1,000/mt.

In the Shanghai nickel spot market, Jinchuan Group cut ex-works nickel prices by RMB 9,000/mt to RMB 176,000/mt. Traded prices were between RMB 174,000-175,000/mt in the morning session, and spot prices climbed to RMB 176,000/mt when LME nickel prices climbed significantly later, while prices of imported nickel were between RMB 174,500-175,000/mt. There were relatively more enquires than transactions, as suppliers showed unwillingness to move goods. However, deals still dominated by traders as end-users still mainly adopted a wait-and-see attitude when prices fluctuated widely.  

To contact the writer on this report: Angelawang@smm.cn

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