SMM Daily Review - 2010/9/21 Base Metals Market

SHANGHAI, Sept. 25 (SMM) --

Copper

SHFE copper market opened low on September 21st. The December delivery copper contract on the SHFE market fluctuated at the RMB 60,000/mt mark after opening at RMB 60,150/mt. The most actively-traded copper contract dropped below RMB 60,000/mt due to profit taking by longs following a drop in China’s domestic stocks market and falling LME copper prices, with support available at RMB 59,500/mt. In the afternoon session, SHFE December delivery copper prices generally moved at around RMB 59,500/mt, and finally closed at RMB 59,830/mt, down RMB 370/mt, or a loss of 0.61%. Both trading volumes and positions fell significantly. Positions for SHFE December delivery copper contract dropped to over 140,000 lots, down as much as 16,612 lots, reflecting strong risk aversion sentiment in the pre-holiday market. Although SHFE copper market closed down on Tuesday, prices remained above the daily moving average, a sign that long momentum still exists. SMM believes that SHFE copper market will wait for a direction from the LME copper market after the Mid-Autumn Day holiday.

Spot trading sentiment on the last trading day before the Mid-Autumn Day holiday was brisk. Cargo-holders kept spot premiums at around positive RMB 30-50/mt despite of rapid declines in the SHFE copper market. Prices for high-quality copper maintained between RMB 59,700-59,800/mt. Due to optimistic outlook towards prices in the post-holiday market, producers of domestic standard-quality copper represented low selling interest. As a result, the price gap between high-quality and standard-quality copper was only in the RMB 50-100/mt range, and deals for standard-quality copper were done at around RMB 59,700/mt, with good transactions, as downstream producers were eager to replenish goods for the upcoming holiday at low prices.

According to data tallied by the Shanghai Futures Exchange (SHFE), inventories were down 3,860 mt during the week with only two trading days available, to 94,365 mt, showing improved demand before the arrival of the holiday. Copper prices in domestic market met resistance to break through the RMB 60,000/mt mark before the Mid-Autumn Day holiday, and SMM believes that domestic copper prices will look for direction from the LME copper market after the holiday.

Aluminum

SHFE 1012 aluminum contract prices opened slightly higher at RMB 15,780/mt on September 21st, and although SHFE 1012 aluminum contract prices fell at a slower pace after opening, prices faced heavy selling pressure due to weak commodity prices, and then moved on a downward track rapidly, with the lowest prices reported at RMB 15,650/mt. As Tuesday was the last trading day before the Mid-Autumn Festival holiday, short positions exited the market after profit-taking at the tail of trading in order to avoid price risks, and SHFE 1012 aluminum contract prices climbed slightly, with prices finally closing at RMB 15,725/mt, down RMB 20/mt, or down 0.13%. Trading volumes of SHFE 1101 aluminum contract increased, while positions of SHFE 1012 aluminum contract declined by over 5,000 lots, indicating it is general market players were uncertain about post-holiday market outlook, with special eye on LME aluminum price trends during the holiday.

Spot aluminum prices fell slightly following SHFE aluminum prices, and although trading sentiment turned neutral from a day earlier, overall transactions were moderate due to relatively higher market sentiment in stock replenishment ahead of the holiday. Most deals were made between RMB 15,360-15,390/mt in east China, with spot discounts ranging between RMB 40-70/mt.  

Lead

In domestic lead market, continuing declines in the LME lead market reduced some producers’ firmness in prices, and traders cut prices for sales as a result. Transactions in the Shanghai market were mainly done in the RMB 16,300-16,450/mt range on Tuesday. Downstream producers’ wait-and-see attitude was rekindled due to marked declines in the LME lead market on Monday and Tuesday. Hence, only a limited number of downstream producers entered the market for purchases on Tuesday, despite lower prices for stock replenishment on the last trading day before the Mid-Autumn Day holiday. In general, trading sentiment in the pre-holiday market was low. 

Zinc

On September 21st, SHFE 1101 zinc contract prices opened low and moved lower negatively affected by LME zinc prices, with prices mainly moving below the daily moving average. In the midday, the Shanghai Stock Exchange composite index dipped to 2,580.18 points, weighing down SHFE 1101 zinc contract prices to test the 20-day moving average, with prices falling to RMB 17,805/mt. However, SHFE 1101 zinc contract prices found support and rallied at the tail of trading, with prices finally closing at RMB 17,955/mt, down RMB 265/mt. Trading volumes significantly decreased by 270,000 lots to 950,000 lots, and total position decreased by nearly 50,000 lots to 261,314 lots, indicating investors exited the market ahead of the holiday in order to avoid price risks.

SHFE zinc prices opened low and moved lower on September 21st, and even slumped later, and zinc spot prices fell following SHFE zinc prices. In Shanghai spot market, #0 zinc was traded between RMB 17,350-17,450/mt, with most deals made at the low-end of price range, while #1 zinc was traded between RMB 17,300-17,400/mt. Downstream buyers showed high interest in replenishing stocks ahead of the holiday, and although some smelters were unwilling to move goods at low prices, overall transactions were brisk. In Guangdong spot market, trading sentiment was also bullish. 0# zinc was traded between RMB 17,400-17,450/mt, and #1 zinc was traded between RMB 17,350-17,400/mt. SHFE zinc inventories increased by 2,940 mt during two trading days of this week, with increases mainly from warehouses at Zhongchu Development Stock Company Shanghai Wusong Branch and Shanghai Guochu Tianwei Warehousing Company.

Tin

LME tin prices opened at USD 23,550/mt and closed at USD 23,375/mt on Monday, down USD 125/mt from a day earlier, with the highest price at USD 23,702/mt and the lowest price at USD 23,210/mt. Trading volumes were 121 lots and positions were 17,306 lots. LME tin prices opened at USD 23,300/mt on Tuesday, and later declined slightly during the Asian trading hours, with prices touching the lowest at USD 23,100/mt, a result of cautious sentiment before the outcome of a meeting of the Federal Reserve's rate-setting committee. LME tin inventories were down by 366 mt to 13,530 mt.

In the Shanghai tin spot market, mainstream traded prices were unchanged from a day earlier. A small amount of tin was traded around RMB 150,000/mt, and tin from Gejiu Non-Ferrous Metals Processing Company and Liuzhou China Tin Group was traded between RMB 148,300-149,000/mt. Traded prices of unknown brand tin were braded between RMB 147,800-148,000/mt. Overall trading sentiment was moderate, and some end-users planned to delay their purchasing plan after the Mid-autumn Festival holiday, resulting in inactive trading sentiment.

Nickel

Most LME base metal prices ended with losses on Monday as cautious investors square their positions before the outcome of a meeting of the Federal Reserve's rate-setting committee. LME nickel prices ended at USD 23,085/mt, down by 0.77%. On Tuesday, LME base metal prices declined before the Federal Reserve's meeting and the Chinese Mid-autumn Festival holiday. LME nickel prices opened at USD 23,030/mt and fell to test USD 22,850/mt after climbing to USD 23,120/mt, but prices later advanced to USD 23,120/mt again due to the US dollar index’s decline below 81. On Tuesday, LME nickel inventories were down by 366 mt to 118,878 mt.

In the Shanghai nickel spot market, transactions were sluggish. Traded prices of nickel from Jinchuan Group were between RMB 171,500-172,000/mt, down USD 500/mt, and traded prices of nickel from Russia were around RMB 170,750/mt, down USD 366/mt from a day earlier. With the approach of the Mid-autumn Festival day holiday and the National day holiday, market players were all wary of entering the market, amid unclear LME nickel price trend.

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