SMM Daily Review - 2010/5/21 Base Metals Market

SHANGHAI, May 24 (SMM) --

Copper

On Friday, SHFE copper market opened low, and remained closely linked to China's A-shares market, with prices falling at first, and then rallied. SHFE three-month copper prices opened low at RMB 53,190/mt, and dropped as low as RMB 52,750/mt following with the depressed domestic stocks market. Later, rebounding stocks markets helped improve SHFE copper market, and SHFE three-month copper prices reached as high as RMB 53,970/mt, but failed to climb higher, and finally closed at RMB 53,670/mt, and with a daily decline of 0.50%, erasing most of daily losses. Positions for SHFE three-month copper were up 6,784 lots, and SHFE September delivery copper increased by 7,568 lots, and with positions for all contracts up 12,364 lots, a sign of brisk long buying. Despite of slight declines at the closing, the pressure at 5-day moving average is still great, and with no clear direction available on technical, suggesting market player concerns over the unexpected negative news from the market. Little price gap between near-month and forward-month contracts resulted in no calendar spread arbitrage. However, the increased SHFE/LME copper price ratio suggested the phenomenon of a strong LME and weak SHFE market was improving, leaving inter-market arbitraging window open, which is expected to support copper prices.

In the spot market, premiums stabilized between positive RMB 200-350/mt. Cargo-holders were reluctant to sell goods due to expectations of price rebounds in the coming week. Imported-goods holders, with profits available already continued to offer premiums for high-quality imported copper at positive RMB 300-350/mt. Supply of domestic high-quality copper remained limited, with high prices, and imported copper continued to dominate market supply. Traded prices increased from RMB 53,500/mt, with deals nearer to RMB 54,000/mt before the closing at the midday. Traded prices in the afternoon trade stabilized at RMB 54,000/mt. Downstream producers showed interest in purchasing goods at lower prices, but remained cautious towards performance in China's A-shares market and LME copper market, with purchases on a gradual basis. 

SHFE copper stocks continued to fall in the weed ended May 21st, down 5,306 mt. SHFE copper inventories dropped for a third consecutive week, with total stocks down to 167,789 mt, a sign that purchasing activities were stimulated at lower prices, and this was also in line with SMM’s survey of domestic wire rod producers in May. According to the SMM survey, operating rates at major domestic wire rod producers were around 80%, up both on a monthly and yearly basis. Those producers replenished some raw materials when prices were lower, though they opted to consume previously piled-up stocks for most period of time.  

No solid news is expected to come out in domestic markets next week, and profit taking will emerge if the US dollar remains high. Copper market is believed to stabilize if financial markets represent stable performance. 

Aluminum

SHFE 1008 aluminum contract prices opened lower at RMB 15,075/mt in the morning session negatively affected by falling LME aluminum prices, and later dipped to RMB 14,940/mt. SHFE aluminum prices fluctuated higher later following rebounding Shanghai Composite Index, with prices hitting the highest level of RMB 15,160/mt. SHFE aluminum prices fell slightly and finally closed at RMB 15,100/mt, down RMB 115/mt compared with the previous trading day, or down 0.76%. Total trading volumes were 104,880 lots, and total positions declined by 88 lots to 258,380 lots.

Aluminum spot markets improved significantly from a day earlier. Aluminum prices bottomed out, triggering downstream buying interest. Although traders were firm at offers, downstream fabricators’ purchasing interest was up, resulting in relatively brisk trading sentiment. LME aluminum prices were weak, and SHFE aluminum prices are expected to remain sluggish with the absence of speculative funds. 

Lead

Trading sentiment in domestic lead markets improved along with LME lead price fluctuations between USD 1,735-1,765/mt, and improved performance in domestic stocks and futures markets. Market supply was limited, as domestic lead smelters continued to maintain prices firm at RMB 15,000/mt, and as no cargos were available due to no opportunities for inter-market arbitraging. Transactions in the Shanghai market were done between RMB 14,500-14,600/mt.

Zinc

SHFE zinc prices opened lower but moved higher on May 21st heavily affected by domestic A-shares market trends. SHFE 1008 zinc contract prices moved around RMB 15,400/mt in the morning session, but later climbed all the way from 11:00 am, with prices finally ending at RMB 15,500/mt. Positions declined, but short momentum was stronger based on the distribution of positions, indicating the upward track for zinc prices will be uneven.

In the spot market, downstream purchasing interest was relatively high on the last trading day of last week (May 17-21) driven up by rising zinc prices. Traded prices for #0 zinc climbed from RMB 15,000/mt to a range of RMB 15,200-15,250/mt in Shanghai, with spot discounts moving around RMB 300/mt against SHFE 1008 zinc contract prices, but market supplies were relatively limited.

Tin

As the euro ceased to fall versus the US dollar on May 20th, LME tin prices closed at USD 17,225/mt, up USD 25/mt, with highest price at USD 17,500/mt and lowest price at USD 17,100/mt. Daily trading volumes were 178 lots and positions were 17,628 lots. On May 21st, LME tin prices opened at USD 17,400/mt, fluctuating narrowly and struggling around 10-day moving average.
In the Shanghai tin market, prices of major brand tin were between RMB 141,500-142,500/mt and prices of unknown brand tin were between RMB 140,500-141,500/mt. Although prices slipped slightly, transactions were still sluggish as downstream consumers continued to adopt a wait-and-see attitude and expected prices to fall further. Prices of spot goods continued to fall, despite that smelters kept offers firm. As the arrivals of goods gradually reduced, any room for prices to fall further is relatively limited.

Nickel

LME nickel prices opened at USD 21,524/mt on May 20th, and closed at USD 21,135/mt, with highest price at USD 21,900/mt and the lowest price at USD 20,700/mt. Daily trading volumes were 2,579 lots and positions were 92,327 lots. On May 21st, LME nickel prices opened at USD 21,200/mt during the Asian trading period, and fluctuated narrowly to test USD 21,410/mt, with prices failing to break through the price band between USD 20,000-22,000/mt.

In the Shanghai nickel spot market, the stable low prices made traders profitless and traded prices of nickel from Jinchuan Group were around RMB 167,000/mt. Goods circulating in the market were limited and low-priced goods were rarely seen in the market. Market sentiment was stagnant and short position sentiment was strong as traders were waiting prices to fall further. Overall trading sentiment was soft, with the exception that few previous high-priced inventories were moved out. Some inventories that were moved out from Shanghai to Changzhou. In addition, some #200 stainless steel mils had already halted production in Guangdong province.

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

 
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