SMM Daily Review - 2010/8/25 Base Metals Market

SHANGHAI, Aug. 27 (SMM) --

Copper

SHFE copper prices opened higher, with prices returning above RMB 57,000/mt and mainly moving around the daily moving average narrowly. SHFE 1012 copper contract prices opened at RMB 57,100/mt in the morning session, and later briefly dipped to RMB 57,050/mt. SHFE 1012 copper contract prices climbed to RMB 57,500/mt in the afternoon driven up by rebounding Shanghai Stock Exchange Composite Index (SSE Composite Index), with prices finally closing at RMB 57,330/mt, up RMB 720/mt, or up 1.3%. Positions of SHFE 1012 copper contract increased slightly by 7,576 lots to 156,000 lots, and trading volumes declined mildly to 268,800 lots, with the turnover rate of 172%. SHFE copper prices again stood above short-term moving averages, but technical indicators show SHFE copper prices lack continued upward momentum in the near term despite that prices fell slower.

In the spot market, spot premiums narrowed despite that SHFE copper prices opened higher. The SHFE/LME copper price ratio recovered to near 8.0, resulting in increases in imported copper supply. High-quality copper was traded at premiums of positive RMB 100/mt in the morning business, while standard-quality copper was traded at premiums of positive RMB 50/mt. Downstream consumers adopted a cautious attitude toward unstable SHFE copper prices, and trading sentiment was bearish. Meanwhile, domestic high-quality copper holders were unwilling to move goods, but imported copper holders were eager to move goods in order to generate cash, and initiatively reduced premiums following SHFE copper price trends, with deals mainly made between RMB 57,400-57,600/mt. Downstream consumers stayed out of the market, and although they believed any declines in copper prices would be limited, they were still waiting for a steadier copper market. At the end of August, large-scale purchasing activities may occur next week or even in September, and copper prices will also continue to fluctuate around RMB 57,000/mt in the near term.         

Aluminum

LME aluminum prices showed signs of rebounding in the morning session, helping push up SHFE aluminum prices, with SHFE 1011 aluminum contract prices opening slightly higher at RMB 15,335/mt. The SSE Composite Index showed mixed performance in the morning, allowing SHFE aluminum prices to fluctuate narrowly, with SHFE 1011 aluminum contract prices climbing slightly to RMB 15,400/mt. SHFE aluminum prices slipped in the afternoon in response to falling SSE Composite Index, with SHFE 1011 aluminum contract prices dipping to RMB 15,290/mt and finally closing at RMB 15,325/mt, up RMB 30/mt, or up 0.2%. Total positions increased by nearly 7,000 lots.

Spot markets remained sluggish, and market supplies of spot aluminum were sufficient in east China. Traders were eager to moving goods to generate cash when aluminum prices moved higher, resulting in higher supply of lower-priced goods. However, downstream buying interest was low due to unclear aluminum price trends, with overall trading sentiment lackluster.

The focus of speculative funds on aluminum increases, but market direction remains unclear, so SHFE aluminum prices will continue to move in a narrow band before any additional economic news are released.          

Zinc

LME zinc prices opened higher in the morning session, and SHFE 1012 zinc contract prices opened slightly higher as well, with prices mainly moving along the daily moving average. The SSE Composite Index soared to 2,616.96 points, driving SHFE 1012 zinc contract prices higher. The US dollar weakened to 82.778 in the afternoon session, and LME zinc prices recovered to between USD 2,010-2,040/mt, both sending SHFE 1012 zinc contract prices to an intraday high of RMB 17,060/mt at the tail of trading, and SHFE 1012 zinc contract prices finally closed at RMB 17,035/mt, up 2.25%. Positions of SHFE 1012 zinc contract increased by 26,450 lots, while trading volumes remained high at 1.72 million lots, with short momentum remaining strong.

SHFE zinc prices opened high and moved higher, driving spot zinc prices higher. In the Shanghai spot market, #0 zinc was traded around RMB 16,550/mt, with spot discounts of RMB 350/mt against SHFE 1012 zinc contract prices, while #1 zinc was traded around RMB 16,500/mt. Downstream consumers chose to stand on the sidelines, resulting in lackluster spot trading sentiment. Spot transactions improved in the afternoon, and traders purchased goods at first, with sensitive market response reported, but downstream buying activity remained bearish.

Lead

Although LME lead prices rallied and later experienced corrections around USD 2,000/mt in the morning trading session, downstream producers were wary to make purchases with inadequate confidence towards market outlook due to consecutive falls in LME lead prices recently. Traders told that smelters kept prices firm without any willingness to cut offers, leading to insufficient supply in spot market. In this context, traders were reluctant to move goods at low prices in view of high costs, causing stagnant trading sentiment in the market. Traded prices in Shanghai lead spot market were almost unchanged from a day earlier, with limited transactions traded between RMB 15,850-15,950/mt.

Tin

LME tin prices opened at USD 20,450/mt and closed at USD 20,200/mt on Wednesday, down USD 200/mt from a day earlier, with the highest price at USD 20,499/mt and the lowest price at USD 20,010/mt. Daily trading volumes were 15,944 lots and positions were 15,944 lots. LME tin inventories were up by 5 mt to 14,095 mt. On Thursday, LME tin prices opened at USD 20,400/mt and tested the highest level at USD 20,650/mt, which is mainly due to a softer US dollar index during the Asian trading hours.

In the Shanghai tin spot market, traded prices continued to slip. A small amount of tin from Yunnan Tin group was traded at RMB 146,000/mt and unknown brand tin were traded between RMB 144,000-145,500/mt. Overall trading sentiment was relatively brisker from a day earlier, which is mainly stimulated by the strong LME tin prices. Possibility for domestic tin prices to rise is small due to lackluster demand fluctuation trend of LME tin prices, but any room for tin prices to fall further is also limited given the slight tight supply of goods available in the market.

Nickel

LME nickel prices opened at USD 20,600/mt and closed at USD 20,300/mt on Wednesday, down USD 224/mt from a day earlier, with the highest price at USD 20,750/mt and the lowest price at USD 20,000/mt. Daily trading volumes were 3,302 lots and positions were 97,377 lots. LME nickel inventories were up by 792mt to 118,302mt. LME nickel prices opened at USD 20,160/mt during the Asian trading hours on Thursday, and climbed to test USD 20,580/mt when the US dollar index fell below 82.84. However, LME nickel prices later slipped along with the rebound of the US dollar index. On August 26, LME nickel inventories were up by 654 mt to 11，8956 mt.

In the Shanghai nickel spot market, traded prices of nickel from Jinchuan Group were down by RMB 500/mt to RMB 165,000-165,500/mt and traded prices of nickel from Russia were also down by 500/mt to RMB 164,000-164,500/mt. Transactions were still sluggish, but ex-works nickel prices from Jinchuan Group were still firm as LME nickel prices were able to stand above USD 20,000/mt. Wait-and-see sentiment from traders was strong, and their willingness to move goods is low.

According to data from China Customs, China’s imports of nickel ore in July were 2,510,246 mt, up 14.17% YoY. Growing demand for nickel ore indicated that downstream stainless steel mills preferred to use NPI to replace refined nickel, serving as a negative factor for nickel prices. SMM believes that if LME nickel prices can stay firm above USD 20,000/mt, ex-works nickel prices from Jinchuan Group will be firm, and vice versa. 

Copyright © SMM. All Rights Reserved

None of this material may be used for any commercial or public use in any forms or means, without the prior written consent of SMM. For reproduction issue, please contact us by email: service.en@smm.cn