SMM Daily Review - 2010/5/28 Base Metals Market

SHANGHAI, May 31 (SMM) --

Copper
On Friday, SHFE September delivery copper contract, the most active one on the SHFE copper market opened high at RMB 55,820/mt, and fluctuated at daily moving average in the morning trade, reaching as high as RMB 56,050/mt. In the afternoon business, SHFE copper prices dropped slightly with falling stocks market in China, with prices generally moving below the daily moving average. Finally, SHFE September delivery copper contract closed at RMB 55,800/mt, up RMB 1,010/mt. Positions for all copper contracts on the SHFE market were down by 11,526 lots. SMM expects SHFE copper prices to climb higher in the future, but will meet great resistance at RMB 57,000/mt. Rising momentum for copper prices not only relies on demand, but support from external markets.

In the spot market, discounts were heard at negative RMB 150/mt-RMB 0/mt. In the morning trade, standard-quality copper was traded between RMB 55,600-55,700/mt, and deals for high-quality copper were done in the RMB 55,650-55,750/mt range. Spot transactions in the afternoon business fell back to RMB 55,500-55,700/mt due to declines on the SHFE copper market. Market selling interest was strong, but overall trading sentiment was low at the end of month.

According to data tallied by Shanghai Futures Exchange (SHFE), copper inventories on the SHFE dropped for a fourth consecutive week, with a weekly decline of 10,091 mt, and total stocks fell to 157,698 mt. A consecutive decline in copper stocks suggested buying activities at lower prices, which will support copper prices in June. The low-end spot copper price is continuing to improve, with prices expected to test RMB 56,000/mt in the coming week. Whether or not spot discounts will expand depends on downstream demand and development of arbitrage window for imports. 

Aluminum
SHFE 1008 aluminum contract prices surged to RMB 15,480/mt after opening at RMB 15,325/mt on May 28th, but later edged down, with prices mainly moving above RMB 15,400/mt in the morning. SHFE 1008 aluminum contract prices were restricted by daily moving average in the afternoon negatively affected by falling domestic A-shares market, with prices dipping to RMB 15,300/mt, and finally prices ended at RMB 15,375/mt, up RMB 170/mt, or up 1.12%. Trading volumes continued to decline, and positions of SHFE 1009 aluminum contract grew gradually. Although SHFE aluminum prices were sluggish, long positions have begun increasing. SHFE forward aluminum contracts prices stood above RMB 15,500/mt, heading for RMB 16,000/mt.

In the spot market, SHFE current-month aluminum contract prices stood above RMB 15,000/mt, causing spot discounts to expand to a range of RMB 80-120/mt, and deals were made between RMB 15,000-15,020/mt. Although suppliers were eager to move goods, downstream consumers were unwilling to purchase goods at the end of this month. In this context, suppliers kept offers firm at RMB 15,000/mt in the morning, and later reduced offers slightly to a range of RMB 14,980-15,000/mt in the afternoon since SHFE aluminum prices slipped in the afternoon.

The low-end of aluminum price range climbed gradually over the past week (May 24-28), but aluminum prices will likely experience fluctuations before standing above RMB 15,000/mt. Although LME aluminum inventories declined continuously, with total inventories falling to 4.56 million mt, domestic aluminum stocks continued to increase, and the supply surplus will remain unchanged in the short term, which will exert resistance on aluminum prices. Whether or not aluminum prices can find support at RMB 15,000/mt will depend on the continuous increases in domestic A-shares market, rising copper prices, as well as growing market optimism.

Lead
Although lead prices in domestic lead markets were quoted higher on Friday along with rising LME lead prices, downstream producers made little positive response, as purchasing interest was low at the weekend and at month's end, waiting for a clear overall trend for base metals market after entering June. Prices were offered in the RMB 14,700-14,800/mt range in the morning, while prices were lowered in the afternoon trade due to lackluster trading sentiment and fluctuating LME lead prices. Traders didn't significantly cut prices in view of insufficient supply, resulting from producer unwillingness to move goods. Trading sentiment failed to improve as a result of this. Limited transactions were done between RMB 14,700-14,800/mt, with deals gravitating towards the low-end. 

Zinc
SHFE zinc prices opened high and moved higher on May 28th, but later fell slightly at noon following declining domestic A-shares market. SHFE 1009 zinc contract prices moved narrowly around RMB 16,000/mt, with the highest prices reported at RMB 16,280/mt, and finally prices ended at RMB 16,115/mt, up 2% compared with the previous trading day. SHFE zinc prices were stronger than spot zinc prices. #0 zinc was mainly traded around RMB 15,650/mt, with spot discounts expanding to RMB 350/mt from RMB 300/mt, while #1 zinc was traded around RMB 15,600/mt. Downstream purchasing interest was lower, and the recovery in market sentiment and confidence will still depend on the stability of zinc prices.

Tin
LME base metal prices all climbed as the euro rebounded and the stock market rallied. LME tin prices opened at USD 17,625/mt and closed at USD 17,975/mt on May 27th, up USD 325/mt from a day earlier, with highest price at USD 18,000/mt and the lowest price at USD 17,525/mt. Daily trading volumes were 203 lots and positions were 17,910 lots. On May 28th, LME tin prices opened at USD 17,990/mt and fell to test USD 17,750/mt at 15:30 following a climb of the US dollar.
 
In the Shanghai tin spot market, market confidence resumed to a certain extent and short position sentiment was dissipating as LME tin price ceased to decline and experienced relatively strong performance on May 27th. On May 28th, some downstream consumers entered the market, and traders told that trading sentiment was improved to a certain extent from several days earlier. Supply of goods was still limited in the market. Mainstream prices of major brand tin were between RMB 142,200-143,000/mt and traded prices of unknown brand tin were between RMB 141,000-141,600/mt. 
 
Nickel
LME nickel prices opened at USD 21,000/mt on May 27th and closed at USD 21,696/mt, up USD 356/mt from a day earlier, with highest price at USD 21,800/mt and the lowest price at USD 21,000/mt. Trading volumes were 1,505 lots and positions were 89,444 lots.
 
On May 28th, LME nickel prices opened at USD 21,800/mt and fluctuated widely. Prices tested the lowest price at USD 21,500/mt and transactions were relatively brisk, with prices still fluctuating between USD 21,000-22,000/mt.
 
In the Shanghai nickel spot market, transactions were stable in the morning session. Traded prices of nickel from Jinchuan Group were between RMB 172,000-173,000/mt and prices of imported nickel were around RMB 172,000/mt. Traded prices gradually declined, and transactions were moderate in the afternoon session, mainly done between traders. Prices fell around RMB 170,000/mt, with overall soft purchasing interest reported in the market. Few domestic #300 stainless steel mills halted production to conduct unit maintenance for around 10 days, and the specific date to resume production at those mills remains unknown.

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

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