SMM Daily Review - 2010/5/27 Base Metals Market

SHANGHAI, May 28 (SMM) --

Copper

The September delivery copper contract on the SHFE market became the most active copper contract on Thursday. SHFE September delivery copper prices opened RMB 410/mt lower at RMB 54,450/mt. After trading as low as RMB 54,310/mt, SHFE September delivery copper prices rebounded with rallying stocks market. Following with a weak US dollar, LME copper prices gained, helping SHFE copper prices advance, with prices closing at RMB 55,300/mt, closer to a daily session high of RMB 55,370/mt, up 0.88%. Positions for SHFE September delivery copper contract increased by 23,928 lots, with a turnover rate of 237.91%. SHFE September delivery copper prices have stood above the 10-day moving average technically, fluctuating in the 10 and 20-day moving average of RMB 55,300-55,500/mt, with upward room available on technical, and US dollar’s fluctuations at high levels will also support the low-end of copper prices. If China’s A-shares market is able to stabilize, market confidence for longs will improve further.

In the spot market, rebounding prices on the SHFE copper market resulted in declines in spot premiums. In the morning trade, spot premiums were reported between positive RMB 50~150/mt, dealing in the RMB 54,600-54,900/mt range. Market supply increased from a day earlier, and supply of both domestic and imported goods was ample, with strong selling interest. However, downstream buying interest was weak. Spot premiums in the afternoon business continued to fall with price rebounds on the SHFE copper market, with spot discounts reported. High-quality copper was quoted at positive RMB 0/mt, and standard-quality copper was heard at discounts of negative 100/mt. Copper prices rose above RMB 55,000/mt, with offers between RMB 55,000-55,200/mt. Market trading sentiment was low, as cargo-holders were looking forward to further price rebounds on Friday, while downstream producers stood on the sidelines to see whether price rebounds would sustain.

Aluminum

SHFE aluminum prices opened slightly low negatively affected by falling LME aluminum prices, and SHFE 1008 aluminum contract prices dipped to the daily low of RMB 15,135/mt after opening at RMB 15,185/mt, but later fluctuated higher supported by rebounding stock markets. SHFE aluminum prices faced strong pressure at the 10-day moving average, with the daily high of RMB 15,265/mt, and finally closed at RMB 15,260/mt, up RMB 35/mt compared with the previous trading day, or up 0.23%. Total positions increased by 4,554 lots to 270,374 lots, and trading volumes were only 74,672 lots. All technical indicators show signs of improving, but any upward momentum is believed to be limited in the short term based on positions and trading volumes, with strong resistance expected at the 10-day moving average.

Downstream buying interest was down significantly due to falling aluminum prices in the spot market, and the wait-and-see sentiment dominated the market, and transactions were lukewarm. China’s regional governments will implement policies to cancel the preferential electricity prices before June 1st, 2010, and will issue details regarding the elimination of outdated capacity in 2010, which will change the structure of aluminum industry in the long term. However, any impact on aluminum prices will be very limited in the short term, and special attention should be paid to possible aluminum production suspension as a result of rising electricity prices, and aluminum prices are expected to remain weak.   

Lead

Since LME lead prices rallied after early losses, domestic lead prices experienced slight increases. In the morning business, domestic lead prices above RMB 14,600/mt generated little downstream acceptance, with deals gravitating towards less than RMB 14,600/mt. Transactions in domestic lead markets were done at RMB 14,650/mt in the afternoon trade, after LME lead prices returned to around USD 1,800/mt. However, overall trading sentiment was lackluster amid strong pessimistic sentiment. 

Zinc

SHFE zinc prices fluctuated after opening lower in the morning session, but later pared previous losses supported by advancing domestic A-shares market. SHFE 1009 zinc contract prices dipped to as low as RMB 15,565/mt, and finally closed at RMB 16,035/mt, up 0.8% compared with the previous trading day. Different from previous several trading days, long positions increased significantly, and positions of SHFE 1009 zinc contract grew by 51,000 lots, indicating zinc prices will fall further after a number of long players closed positions. However, whether or not spot zinc prices can get support at RMB 15,000/mt remains unknown.

Downstream producers' purchasing interest was depressed by lower zinc prices in the sport market, and later downstream producers were unwilling to buy goods at higher prices when zinc prices rose rapidly at noon. In this context, spot transactions were very weak, and almost no deals were made in the afternoon. #0 zinc was mainly traded between RMB 15,250-15,350/mt in Shanghai market, with spot discounts ranging between RMB 280-300/mt against SHFE 1008 zinc contract prices, while #1 zinc was traded in the RMB 15,200-15,300/mt range, with most deals made at the low-end. Smelters were reluctant to move goods recently, and regional stocks reported limited declines as a result, especially in south China and north China.  

Tin

European and the US stock markets rebounded on May 26th and the US macroeconomic data were optimistic, which helped support metal prices.  However, as the euro was weak versus the US dollar, metal prices shaved previous gains slightly.  LME tin prices opened at USD 17,625/mt and closed at USD 17,650/mt on May26th, up USD 150/mt from a day earlier, with the highest price at USD 17,800/mt and the lowest price at USD 17,500/mt.  Daily trading volumes were 200 lots and positions were 17,760 lots. On May 27th, LME tin prices opened at USD 17,569/mt, and moved between USD 17,500-17,700/mt, which is mainly weighted by the strengthening US dollar. 

Shanghai tin spot market, spot prices remained flat from a day earlier, with traded prices of major brand tin between RMB 142,000-142,500/mt and traded prices of unknown brand tin between RMB 140,500-141,500/mt. Supply of goods was limited in the market and downstream consumers only made purchases on an as-needed basis. The overall trading sentiment of this week is sluggish. 

Nickel

Prices opened at USD 21,400/mt on May 26th and closed at USD 21,340/mt, up USD 98/mt from a day earlier, with highest price at USD 21,790/mt and the lowest price at USD 21,000/mt. Daily trading volumes were 1,526 lots and positions were 89,221 lots. As the euro was weak on May 26th, the US dollar strengthened, which helped weigh on base metal prices and shave previous gains.  On May 27th, LME nickel prices opened at USD 21,000/mt but later advanced to move between USD 21,000-22,000/mt.

In the Shanghai nickel spot market, spot transactions were relatively sluggish as LME nickel prices were weak in the morning session, and domestic showed unwillingness to move goods in the afternoon session when LME nickel prices climbed later, resulting in relatively soft trading sentiment. Transactions were dominated by traders, with mainstream traded prices of nickel from Jinchuan Group between RMB 170,700-171,300/mt and traded prices of nickel from Russia between RMB 170,000-170,500/mt.

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

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