SMM Daily Review - 2010/8/10 Base Metals Market

SHANGHAI, Aug. 11 (SMM) --
Copper:
China will announce a series of major economic data on Wednesday, and market expected the CPI will rise to 3.3%. China's slowing exports data sent domestic stock markets lower. In the afternoon, China A-share market dropped below 2,600 points and closed at 2,596 points, down as much as 2.86%, weighing on SHFE copper market. SHFE copper for November delivery opened at RMB 57,990/mt, and moved below the daily moving average after briefly reaching RMB 58,030/mt, down as low as RMB 57,130/mt before ending at RMB 57,240/mt, down RMB 850/mt, or a loss of 1.46%. Trading volumes were down, and positions for SHFE November delivery copper contract were slightly up 1,770 lots. SHFE copper market has fell below the 5-day moving average, pointing to the 10-day moving average, and a downward track is available technically. Once SHFE copper market drops below the 10-day moving average, the range of price adjustments will extend. Particular attention should be paid to the data due Wednesday, which will set a tone for market movements. After strong gains in July on both stocks and copper markets, it is normal to see downward corrections.

In the spot market, traded prices moved lower. In the morning business, high-quality copper was quoted at discounts of negative RMB 50/mt to RMB 0/mt, with deals mainly between RMB 57,550-57,700/mt. However, traded prices in the afternoon trade fell to RMB 57,300-57,500/mt, as spot premiums emerged due to price declines on the SHFE market, with high-quality copper offered at premiums of positive RMB 20-50/mt. Transactions of domestic standard-quality copper were depressed, as cargo-holders of domestic standard-quality copper were unwilling to expand spot discounts, narrowing price gap between high-quality and standard-quality copper. If SHFE copper prices fall further tomorrow, spot market will return to trade at premiums again.

Aluminum:
SHFE aluminum prices opened slightly lower negatively affected by falling LME aluminum prices, and SHFE 1011 aluminum contract prices opened at the 5-day moving average of RMB 15,705/mt. Market players were pessimistic toward China's economic data due for release on August 11th, and China's stock markets slumped. The strengthening US dollar caused LME base metals prices to fall, also exerting negative impact on SHFE market. SHFE 1011 aluminum contract prices slipped all the way and fell to the previous RMB 15,500/mt support level, with the lowest prices reported at RMB 15,520/mt, and finally prices ended at RMB 15,545/mt, down RMB 180/mt compared with the previous trading day, or down 1.14%. Trading volumes were 124,468 lots, and total positions declined by 648 lots to 309,140 lots. SHFE 1011 aluminum contract prices have fallen below 5-day and 10-day moving averages, with technical indicators showing signs of falling.

The sluggish SHFE aluminum market also affected spot markets negatively, and regional traders cut spot offers continuously following declining SHFE aluminum prices, but downstream producers continued to stand on the sidelines, and traders chose to stay out of the market as well at the closing. As a result, overall trading sentiment was sluggish.

SHFE aluminum prices closed with declines after steady rises, with prices even falling to below 5-day and 10-day moving averages, so it is inevitable for SHFE aluminum prices to undergo downward corrections in the short term. In addition, market response to China's economic data due for release at 10:00 am on August 11th will affect SHFE aluminum price trends, and special focus should be put on the impact from the statement of the Federal Open Market Committee on the US dollar trends.

Lead:
Market views were mixed towards the outlook, as LME lead prices constantly fell during Asian trading hours. However, lead producers kept prices firm along with supply shortages of lead concentrate and improved consumption from pervious gains in the LME lead market, with low selling interest. Downstream producers with limited inventories in hands stood on the sidelines again due to LME lead declines on today's Asian trading hours. Transactions in the Shanghai market were traded in the RMB 16,250-16,350/mt for "Gejiu" brand lead, and deals for well-known branded goods were between RMB 16,400-16,500/mt.

Zinc:
SHFE 1011 zinc prices opened higher at RMB 17,650/mt in the morning session, and later climbed to RMB 17,695/mt. However, SHFE 1011 zinc contract prices later slipped all the way under the pressure of plunging stock markets and strengthening US dollar, and finally closed at RMB 17,400/mt, down RMB 190/mt, or down 1.08%. Positions of SHFE 1011 zinc contract fell by 17,004 lots, and trading volumes declined to 785,500 lots, with the turnover rate of 364%. Large amounts of speculative funds have shifted to SHFE 1012 zinc contract, and positions of SHFE 1012 zinc contract continued to increase by 8,234 lots, with trading volumes growing as well. Long positions exited the market, but short positions grew. SHFE zinc prices reported limited declines, and prices still moved above the 5-day moving average, but the financial attribute of SHFE zinc is strong, and speculative activities are bullish, so SHFE zinc prices are expected to post larger declines than other base metals prices once all base metals prices move to a downward track. 

Spot zinc prices remained high in the morning session in Shanghai market despite of fluctuating SHFE zinc price. Offers for #0 zinc were between RMB 17,050-17,100/mt, with offers for limited brands reported at above RMB 17,100/mt in the morning session, but deals were limited. #1 zinc was traded around RMB 17,020/mt. Overall financial markets slumped in the afternoon, triggering cargo-holders' concerns, and downstream buying interest was depressed again. Traders who hedged goods in futures market were eager to move goods in order to take profits, and spot zinc prices fell to below RMB 17,000/mt in response, but no market response was reported. Spot discounts moved between RMB 400-500/mt against SHFE 1011 zinc contract prices.         

Tin:
LME tin prices opened at USD 20,799/mt and closed at USD 21,350/mt on Monday, up USD 670/mt from a day earlier, with the highest price at USD 21,500/mt and the lowest price at USD 20,750/mt. Daily trading volumes were 215 lots and positions were 17,732 lots. LME tin inventories were down by 145 mt to 14,895 mt. Production cut from Indonesia pushed up tin prices significantly, and a 14-month low inventory level also lend support to tin prices. On Tuesday, LME tin prices slipped during the Asian trading period, and LME tin prices fell to test USD 20,700/mt, which is mainly due to a strong US dollar, coupled with further loose monetary policy by the US Federal Reserve.

In the Shanghai tin spot market, tin prices didn't catch up with strong LME tin prices, and wait-and-see sentiment grew stronger as spot transactions were negatively affected when LME tin prices slip sharply on Tuesday. Traded prices were almost unchanged from a day earlier, with traded prices of major brand tin between RMB 150,000-153,000/mt and traded prices of unknown brand tin around RMB 149,000/mt. Supply of low-priced goods reduced, but transactions at high prices were limited, resulting relatively lukewarm trading sentiment. Although LME tin prices showed signs to experience corrections, mainstream spot tin prices will still stay firm amid high raw material prices and relatively high LME tin prices.

Nickel:
LME nickel prices opened at USD 22,225/mt and closed at USD 22,830/mt on Monday, up USD 810/mt from a day earlier, with the highest price at USD 22,898/mt and the lowest price at USD 22,100mt. Daily trading volumes were 2,043 lots and positions were 89,086 lots. LME nickel inventories were down 1,062mt to 116,274mt. LME nickel prices ended with strong gains, and hit a three-month high, which is mainly pushed up by technical buying.  As the US dollar strengthened and the US Federal Reserve will adopt further loose monetary policy, LME nickel prices opened at USD 22,700/mt on Tuesday, reaching the highest level at USD 22,700/mt and touching the lowest level at USD 22,285/mt, with the latest at USD 22,370/mt, down USD 460/mt from a day earlier.

In the Shanghai nickel spot market, Jinchuan Group to raise its ex-works nickel prices again to RMB 171,000/mt. LME nickel price weakened on Tuesday, and wait-and-see sentiment grew, resulting in sluggish transactions. Mainstream traded prices of nickel from Jinchuan Group were around RMB 170,000/mt and traded prices of nickel from Russia were between RMB 169,000-169,300/mt.   

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