SMM Daily Review - 2010/9/8 Base Metals Market

SHANGHAI, Sept. 9 (SMM) --

Copper

SHFE copper market rallied from lows on Wednesday. The December delivery copper contract on the SHFE market opened briefly dropped to RMB 59,320/mt after opening at RMB 59,700/mt, and was pressed below the daily moving average in the morning. The most actively-traded copper contract rallied at the midday when China’s domestic stock markets stabilized and tried to climb further, and the drop in the US dollar after failing to reach 83 also lent the support. Therefore, SHFE December delivery copper contract stood above the daily moving average, and reached as high as RMB 59,870/mt. In the afternoon session, SHFE December delivery copper contract fluctuated at high levels, and finally closed at RMB 59,780/mt, down RMB 50/mt, or a loss of 0.08%. The strong resistance at the RMB 59,800/mt mark indicates heavy pressure at the 5-day moving average, causing SHFE copper prices to fall to the price band between 5 and 10-day moving average. Currently, SHFE copper market is able to find support at the 10-day moving average. Long sentiment remains in the market, while the US dollar will likely rebound. Therefore, SMM believes SHFE copper market will experience further corrections at high levels.

In the spot market, transactions were brisk in the morning business, and spot discounts were between negative RMB 100-200/mt as SHFE copper market rallied with rising China’s stock markets and market sentiment remained bullish. Bargain hunting was brisk, and buying interest for high-quality was strong. Spot discounts narrowed along with gains in the SHFE copper market, and traded prices were pushed up quickly, advancing from RMB 59,300-59,400/mt in the morning trade to RMB 59,400-59,650/mt in the afternoon. Spot discounts for high-quality copper were less than negative RMB 50/mt, and with strong purchasing interest, and this also improved sales of standard-quality copper, with spot discounts narrowing to negative around RMB 100/mt. Market supply dropped along with domestic standard-quality copper firmness to trade at narrower spot discounts. “Guixi” brand copper was still quoted at higher prices before the upcoming delivery date, and briefly traded at discounts of negative RMB 0/mt, suggesting its unwillingness to move goods at discounts. Brisk bargain hunting in the spot market supported copper market, and also reflected demand for stock replenishment for the upcoming holidays.

Aluminum

The plummeting LME aluminum prices dragged down SHFE aluminum prices, with SHFE 1012 aluminum contract prices falling to as low as RMB 15,750/mt after opening at RMB 15,825/mt. Although SHFE 1012 aluminum contract prices were very weak in the morning session, long investors entered the market in the afternoon session, allowing SHFE 1012 aluminum contract prices to regain previous losses. As a result, SHFE 1012 aluminum contract prices held steady at RMB 15,800/mt, and closed at RMB 15,815/mt, down RMB 80/mt, or down 0.5%. Trading volumes of SHFE 1012 aluminum contract fell from a high, and total positions declined slightly as well. However, investors remained optimistic toward aluminum prices despite of falling SHFE aluminum prices, but SHFE aluminum prices were under heavy selling pressure at high levels, with prices expected to fluctuate in a narrow band.

Spot discounts in east China narrowed to RMB 100-120/mt against SHFE 1009 aluminum contract prices, and traders showed high interest in moving goods. The recovering SHFE aluminum prices in the afternoon stimulated downstream buying interest, with market sentiment improving significantly. Most deals were made between RMB 15,300-15,330/mt in east China in the morning, and traded prices climbed slightly in the afternoon following SHFE aluminum price trends.          

Lead

Continuing gains in the LME lead market came to an end following declines in LME lead market overnight, and slight increases during its earlier Asian trading hours raised doubts among domestic downstream producers over the outlook. In this context, trading sentiment in domestic lead markets was lackluster in the morning, with deals made between RMB 16,150-16,350/mt. LME lead prices rallied at noon, and downstream buying interest increased as a result, improving market transactions. In view of brisk downstream purchasing interest, traders in the afternoon lifted prices by around RMB 50/mt. Goods from Gejiu, Yunnan province were made between RMB 16,200-16,250/mt, and well-known branded goods were done in the RMB 16,350-16,400/mt range. Traders reported unwillingness to move goods, especially for well-known branded goods due to limited stocks in hands, with firm prices. In this context, downstream producers preferred to purchase relatively low-priced lead from Gejiu, Yunnan province on Wednesday.

Zinc

Negatively affected by LME zinc prices, SHFE 1012 zinc contract prices fell to between RMB 17,950-17,900/mt in the morning session. The US dollar index retreated to 82.6 after advancing to 82.902, helping support SHFE 1012 zinc contract prices to fluctuate higher, and SHFE 1012 zinc contract prices finally closed at RMB 18,210/mt, up RMB 135/mt, or up 0.75%, with prices holding steady at the RMB 18,000/mt mark. Trading volumes of SHFE 1012 zinc contract were 1.15 million lots, up more than 40,000 lots from a day earlier, while positions were over 250,000 lots, down 20,000 lots from a day earlier. Trading volumes of SHFE 1101 zinc contract reached 620,000 lots, with positions reaching 220,000 lots, and with the turnover rate of 280%. Although SHFE 1012 zinc contract prices fell to test the 5-day moving average, prices still stood above all moving averages, with strong long momentum unchanged compared with SHFE copper and aluminum prices.  

SHFE zinc prices fluctuated widely affected by the US dollar, and spot zinc prices fluctuated significantly in response. In the Shanghai spot market, #0 zinc was traded between RMB 17,500-17,550/mt, and later traded prices climbed to between RMB 17,600-17,650/mt as a weaker US dollar drove SHFE zinc prices higher, while #1 zinc was traded around RMB 17,530/mt. In the Guangdong spot market, #0 zinc was traded between RMB 17,550-17,600/mt, while #1 zinc was traded between RMB 17,500-17,550/mt, with the trading sentiment flat at Shanghai market, and downstream purchases were limited. Smelters showed high interest in moving goods, and traders who bought spot goods around RMB 17,000/mt previously were also moving goods actively. However, downstream producers still purchased goods on an as-needed basis.

Tin

LME tin prices opened at USD 20,855/mt and closed at USD 20,950/mt on Tuesday, unchanged from a day earlier, with the highest price at USD 21,290/mt and the lowest price at USD 20,574/mt. Daily trading volumes were 217 lots and positions were 15,992 lots. On Wednesday, LME tin prices opened at USD 21,100/mt and fluctuated around USD 21,000/mt. LME tin inventories were down by 30 mt to 14,315/mt. Concern over reliability on banks in the euro zone pushed up US dollar index, weighing down on base metal prices. On Wednesday, tin prices climbed slightly, waiting for guidance from China’s imports and exports data.

In the Shanghai tin spot market, constant decline of LME tin prices and sluggish consumption dampened market sentiment, and mainstream prices continued to slip in response. Major brand tin was traded between RMB 146,000-147,000/mt and unknown brand tin was traded around RMB 145,000/mt. Supply of good was limited in the market, and price spread between major brand tin and unknown brand tin narrowed, with continuous sluggish trading sentiment reported. Both smelters and traders lowered offers this week, but still failing to stimulate downstream purchasing interest. Currently speaking, market demand is the key factor reversing current sluggish market condition, and tin market can only wait for the coming of traditional high-demand period in Q4.

Nickel

Base metal prices largely ended with losses on Tuesday on strong US dollar index, but LME nickel prices advanced by 0.05% from the support that most NPI producers with blast furnaces will halt production. LME nickel prices finished at USD 22,150/mt up USD 10/mt from a day earlier, with the highest price at USD 22,175/mt and the lowest price at USD 21,500/mt. Inventories were down by 396 mt to 21,500 mt.

On Wednesday, LME nickel prices opened at USD 22,100/mt. Although LME nickel prices finally advanced after testing low on Tuesday, price fluctuation made investors remain more cautiously, resulting in wait-and-see sentiment by most market players and low trading volumes. Later base metal prices all strengthened and LME nickel prices climbed to test USD 22,475/mt on support from Japan’s machinery orders, strong China’s imports and exports data and price increase of LME copper. Then, LME nickel prices slipped to certain extent when the US dollar index climbed again. LME nickel inventories were down by 210 mt to 119,280 mt.

In the Shanghai nickel spot market, trading volumes were limited in the morning trading hours when LME nickel market remained cautiously. However, transactions improved in the afternoon trading hours when LME nickel prices stabilized later. Transactions were relatively brisk on Wednesday, but were largely done between traders. Spot traded prices didn’t change too much. Mainstream traded prices of nickel from Jinchuan Group were between RMB 169,000-169,500/mt and mainstream traded prices of nickel from Russia were between RMB 168,000-168,500/mt.

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