SMM Daily Review - 2010/9/29 Base Metals Market

SHANGHAI, Sep. 30 (SMM) --

Copper

SHFE 1101 copper contract opened high at RMB 60,800/mt on Wednesday, and fluctuated narrowly around 5-day moving average during the morning trading session. SHFE copper prices still received support RMB 60,500/mt after slipping to RMB 60,450/mt during the afternoon trading hours. LME copper prices gradually advanced and hit a new high at USD 8,036/mt last seen in April when the US dollar slipped further and the euro broke through 1.36 during the afternoon trading hours. SHFE 1101 copper contract finished at intraday high of USD 60,850/mt, up by RMB 430/mt, or up by 0.71%. Trading volumes and positions both improved mildly. SMM believes that SHFE copper market will stand above RMB 61,000/mt and new resistance level will be lifted to around RMB 61,500/mt.

Price fluctuated narrowly in SHFE copper market during the morning trading session, but suppliers were eager to move goods for cash. Spot discounts for high-quality copper were at negative RMB 100/mt, standard-quality copper at negative around RMB 200/mt and hydro-copper at negative more than RMB 250/mt in the morning trading session, dealing in the RMB 60,300-60,450/mt range. Expanded spot discounts for high-quality copper promoted transactions from stock-builders immediately, but standard-quality copper still met difficulties to be traded. In the afternoon trading session, some traders’ eagerness to move goods grew further, spot discounts for high-quality copper even expanded between negative RMB 200-300/mt, imported hydro-copper copper almost between negative RMB 400-500/mt, with domestic standard-quality copper enjoying no competitiveness. However, copper prices were still firm above RMB 60,000/mt. SMM believes, Thursday is the last trading day before the National Day holiday, and trading sentiment in the spot market will be quiet. SHFE copper market is expected to open high again given LME copper’s high at USD 8,000/mt, but position squaring may drag SHFE copper prices. Copper spot prices may test RMB 60,500/mt again, but transactions may be sluggish. 

Aluminum

SHFE 1012 aluminum contract prices opened flat at RMB 15,920/mt, and fell again after soaring to RMB 16,000/mt in the morning session. SHFE 1012 aluminum contract prices even dipped to RMB 15,855/mt dragged down by the Shanghai Stock Exchange Composite Index. Base metals prices rallied at the tail of trading led by strengthening LME base metals prices, and SHFE 1012 aluminum contract prices closed slightly higher at RMB 15,950/mt. Total positions fell slightly, and both long and short investors were cautious. Thursday is the last trading day ahead of National Day holiday, and LME aluminum prices are near the recent new high of USD 2,336/mt, so if LME aluminum prices can stabilize on Wednesday night, SHFE 1012 aluminum contract prices will climb to break the resistance at RMB 16,000/mt on Thursday.

In the spot market, spot discounts remained between RMB 70-100/mt in east China, and overall market sentiment was quiet. Downstream fabricators generally completed the stock replenishment ahead of holiday, so they chose to stand on the sidelines amid steadily rising aluminum prices, and had no intention of purchasing more goods at higher prices. Meanwhile, traders showed little interest in moving goods in anticipation of higher prices after the holiday in view of strengthening LME aluminum prices and production cuts at domestic aluminum producers. Struggles between buyers and sellers will remain intense after the holiday, and aluminum market will remain sluggish on Thursday if aluminum prices continue to rise.     

Lead

In domestic lead spot market, the overall transactions were moderate. Most downstream producers purchased ample raw materials for production several days ago. A few others showed low acceptance to traders’ offers for well-known brand lead despite their willingness of entering the market. In addition, traders were reluctant to keep heavy stocks in hand during the National Day holiday due to risk concerns, and thus did not keep prices as firm as before. In this context, well-known brand lead was offered at RMB 16,650/mt preliminarily, but actual traded prices were lower. Although LME lead prices advanced in the afternoon trading hours, transactions were still sluggish in domestic lead spot market. Mainstream traded prices were in the RMB 16,500-16,600/mt range in the Shanghai market.

Zinc

On Wednesday, SHFE 1101 zinc contract prices moved around the daily moving average in the morning session, and slipped to between RMB 18,010-18,050/mt in the midday, with prices dipping to a daily low of RMB 17,880/mt. At the tail of trading, as the US dollar index fell to 78.62, SHFE 1101 zinc contract prices rallied, and finally closed at RMB 18,125/mt, up RMB 150/mt. The trading volumes increased by 100,000 lots to 700,000 lots, and total positions decreased by 19,420 lots to 240,000 lots, with long position momentum stronger.

On Wednesday, SHFE 1101 zinc contract prices opened high but moved lower, with prices moving around the daily moving average in the morning session but slipping below the daily moving average to around RMB 18,040/mt in the midday. In Shanghai spot market, #0 zinc was traded around RMB 17,500/mt, with discounts of RMB 550/mt against SHFE 1101 zinc contract prices, while #1 zinc was traded around RMB 17,450/mt. The buyers made some purchases before the National Day holiday, but market players mainly adopted a cautious attitude, keeping overall transactions general. In Guangdong spot market, #0 zinc was traded between RMB 17,450-17,500/mt, and #1 zinc was traded between RMB 17,350-17,400/mt. The transactions in Guangdong were even weaker compared to Shanghai, and downstream buying interests were low.

Tin

LME tin market opened at USD 23,650/mt on Tuesday, and got support at the lowest level of USD 23,500/mt. The US dollar slid against most currencies, given that the US Consumer Confidence Index for September released in the evening was much lower than expected and the lowest level since this February. In this context, investors’ buying interest for metals improved. In response, tin prices improved to close at USD 24,000/mt on Tuesday, up USD 350/mt, and with a new high of USD 24,050/mt. Overall trading volumes were 389 lots, and positions were 17,247 lots. During Wednesday’s Asian trading session, LME tin market opened at USD 23,951/mt, and advanced to a new high of USD 24,349/mt due to continuous declining US dollar, but failed to break through this level. LME tin inventories were 13,515 mt, up 15 mt.  

With one day available before the National Day holiday in the Shanghai tin spot market, overall trading sentiment did not improve despite of new highs in LME tin market. Traded prices were still unchanged from a day earlier due to concerns over prices during the National Day holiday. Since downstream producers were not active in purchasing and only made sparse purchases, traders were reluctant to replenish stocks from low confidence towards consumption after the National Day holiday. In this context, transactions did not show any sign of improvement, and thus prices could not grow. Traded prices were in the RMB 150,000-151,000/mt range for tin from Yunnan Tin Group; between RMB 149,500-150,000/mt for tin from Gejiu Non-Ferrous Metals Processing Company and Gejiu Zili Mining and Metallurgy Company; and between RMB 148,000-148,800/mt for unknown brand tin. SMM expects that trading volumes may reduce on Thursday.

Nickel

Base metal prices largely ended with gains on Tuesday, boosted by a weaker dollar against the euro. LME nickel market opened at USD 23,000/mt finished at USD 23,195/mt, up USD 75/mt from a day earlier, with the highest price at USD 23,249/mt and the lowest price at USD 22,700/mt. Daily trading volumes were 1,362 lots and positions were 97,044 lots. LME nickel inventories were up by 1,176 mt to 122,208 mt. Boosted by sharp decline of the US dollar, LME copper prices broke through USD 8,000/mt on Wednesday, and base metal prices strengthened again. LME nickel market opened at USD 23,200/mt on Wednesday, reaching the highest at USD 23,400/mt and testing the lowest at USD 23,100/mt. Inventories were up by 450 mt to 122,658 mt.

In the Shanghai nickel spot market, transactions were relatively brisk due to stock replenishment from downstream producers before the National Day holiday. Mainstream traded prices of nickel from Jinchuan Group were between RMB 172,500-172,800/mt, up by RMB 750/mt, and traded prices of nickel from Russia were between RMB 171,800-172,000/mt, up by RMB 500/mt.

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