SMM Daily Review - 2010/7/27 Base Metals Market

SHANGHAI, July 28 (SMM) --

Copper

On Tuesday, SHFE copper market opened high, but failed to advance further due to great resistance. SHFE copper for October delivery briefly reached RMB 55,700/mt after opening high at RMB 55,620/mt, but felt sell-off pressure. Later, SHFE October delivery copper contract price rallied to RMB 55,550/mt after buying activity was stimulated at RMB 55,300/mt. Finally, the October delivery copper contract on the SHFE market closed at RMB 55,100/mt, down RMB 320/mt, or 0.58%. Positions for SHFE October delivery copper contract were down 18,864 lots, and trading volumes dropped as well. As the end of month, trading for SHFE November delivery copper contract is becoming brisk, with positions up 21,048 lots, and trading volumes approached 300,000 lots. A new contract month will begin tomorrow. After rallying for a sixth day, SHFE copper market closed in negative territory on Tuesday. Although an upward room is still available on technical indicators, a rising momentum is weaker, suggesting that SHFE copper prices will experience corrections technically in the short term.

In the spot market, suppliers of domestic goods were eager to move goods for cash generation, given strong resistance to move higher on the SHFE copper market. In this context, spot premiums for high-quality copper dropped to RMB 0/mt from positive RMB 30/mt, and standard-quality copper was quoted at discounts of negative RMB 50/mt, and hydro-copper at discounts of negative RMB 100/mt. Transactions were traded in the RMB 55,500-55,700/mt range. As SHFE copper prices rallied at a slow pace compared with LME copper prices, the SHFE/LME copper price ratio dropped to around 7.80, limiting supply of imported copper. Downstream producers were wary of purchases, and traders with optimistic outlook were active in the market. Spot copper prices have gained at a slow pace when pointing to RMB 56,000/mt, and whether or not spot copper prices will climb higher and spot premiums will appear in the market depend on market confidence towards price rallies.

Aluminum

SHFE 1010 aluminum contract prices opened slightly higher at RMB 15,385/mt, but later slipped as a result of weaker base metals market in the morning session. SHFE 1010 aluminum contract prices dipped to RMB 15,280/mt, and picked up to RMB 15,415/mt temporarily in the afternoon, and finally closed at RMB 15,300/mt due to profit-taking by long positions, down RMB 55/mt compared with the previous trading day, or down 0.36%. Total trading volumes reported 106,934 lots, and total positions slumped by 5,340 lots. SHFE aluminum prices faced resistance and tried to find support at the 60-day moving average.

In the spot market, spot discounts expanded slightly against SHFE aluminum prices, stimulating traders' purchasing interest, but a portion of materials tied up in financial deals failed to flow into spot markets, causing market supply to become slightly tight. Downstream fabricators adopted a wait-and-see attitude, and mainly made purchases on an as-needed basis. Aluminum prices faced resistance on their upward track, and SHFE 1010 aluminum contract prices stood above the 60-day moving average hesitantly, and will likely fall to between RMB 15,100-15,200/mt in the future based on technical indicators.    

Lead

Domestic lead prices kept its rising trend on Tuesday, but advanced at a slow pace due to corrections on the LME lead market. Traders said transactions were closely linked to price movements, and trading sentiment was low at higher prices. Existing prices have approached to the high price band of RMB 15,000-16,000/mt seen in March and April, and market showed concerns about whether or not lead prices will move higher. Some lead producers represented intention to move goods, while downstream producers were wary of purchases at higher prices.

Zinc

Although LME base metals prices rallied, SHFE 1011 zinc contract prices failed to maintain the growth after opening slightly higher, with prices mainly moving narrowly around RMB 16,100/mt. SHFE 1011 zinc contract prices even slipped rapidly at the closing driven down by falling SHFE copper prices and the withdrawal of large amounts of speculative funds, and finally prices ended at RMB 15,990/mt. Positions of SHFE 1011 zinc contract only increased by 7,910 lots, much lower than a gain of 100,000 lots recorded on July 26th. In this context, domestic zinc prices will face strong resistance if prices climb further in the near term.

The weaker SHFE zinc prices also depressed downstream buying interest, and overall spot markets were sluggish on July 27th. #0 zinc was mainly traded between RMB 15,750-15,780/mt in Shanghai, but traded prices for #0 zinc fell to RMB 15,700/mt in the afternoon. #1 zinc was traded between RMB 15,700-15,750/mt, and traded prices for #1 zinc fell in the afternoon as well, but trading volumes were limited.

Tin

LME tin prices opened at USD 19,200/mt and closed at USD 19,451/mt on Monday, up USD 276/mt from a day earlier, with the highest price at USD 19,670/mt and the lowest price at USD 19,200/mt. Daily trading volumes were 336 lots and positions were 17,390 lots. LME tin inventories reduced by 250mt to 15,370mt. LME tin prices extended gains on strong fundamentals and the better-than-expected new home sales data from the US. On Tuesday, LME tin prices opened at USD 19,700/mt, reaching the highest at USD 19,800/mt and touching the lowest at USD 19,450/mt. The steady decline of LME tin inventories helped support tin prices.

In the Shanghai tin spot market, mainstream tin prices continued to climb under the context that smelters constantly lifted offers and supply of goods was limited in the market. Traded prices of tin from Yunnan Tin group and Yunnan Gejiu Zili Metallurgy Co., Ltd were between RMB 146,000-147,000/mt and traded prices of unknown brand tin were between RMB 145,000-145,500/mt, with few volumes of tin  traded at RMB 144,000/mt. Few traders offers relatively high prices in the morning session, but price acceptance was low. Low-priced goods were rarely seen in the market, while transactions of high-priced goods were not good. Downstream purchasers still remain cautiously when prices are surging. 

Nickel

LME nickel prices opened at USD 20,310/mt and closed at USD 20,775/mt on Monday, up USD 350/mt from a day earlier, with the highest price at USD 20,810/mt and the lowest price at USD 20,310mt. Daily trading volumes were 2,269 lots and positions were 87,100 lots. Inventories reduced by 552mt to 116,262mt. On Tuesday, LME nickel prices opened at USD 20,701/mt, reaching the highest level at USD 20,850/mt and touching the lowest level at USD 20,600/mt, with the latest at USD 20,818/mt, up USD 43/mt from a day earlier.

In the Shanghai nickel spot market, downstream enquiries were relatively brisk, but overall trading sentiment became relatively sluggish from a day earlier as purchases remained cautiously when prices climbed rapidly. Jinchuan Group lifted ex-works nickel prices to RMB 158,000/mt. Prices of Russian nickel were between RMB 159,500-160,000/mt and prices of nickel from Jinchuan Group were between RMB 160,500-161,000/mt.

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