SMM Daily Review – 2010/12/8 Base Metals Market

SHANGHAI, Dec. 9 (SMM) –

Copper
The copper for delivery in three months in the SHFE market opened slightly higher at RMB 66,100/mt on Wednesday, and then fluctuated between RMB 66,200/mt and RMB 65,900/mt in the morning session. SHFE three-month copper contract prices advanced suddenly at the midday to RMB 66,450/mt, and then fell back to the low level seen in the morning session before the end of trading at the midday. Although SHFE 1103 copper contract prices tried to move higher in the afternoon session, pressure from position closing sent prices down rapidly at the tail of trading, with prices finally closing at RMB 65,520/mt, nearly down below the 5-day moving average. Positions for SHFE three-month copper contract prices were up slightly by 6,172 lots to approach 200,000 lots, and trading volumes expanded to more than 272,000 lots. After constant gains in recent days, SHFE copper prices are expected to fluctuate at high levels based on technical indicators. China will announce a series of economic data over this weekend, and whether or not China will lift interest rates remains to be seen. In this context, a strongly cautious attitude is prevailing in China’s domestic copper market. 

Spot market supply was tight on Wednesday, with firm offers. Supply of high-quality copper was tight due to brisk transactions, and supply of domestic copper also dropped significantly. Spot discounts for high-quality copper were around negative RMB 70/mt, and negative RMB 100-150/mt for standard-quality copper. Deals were made in a wide price band. Traded prices were heard at RMB 65,200-65,300/mt when SHFE copper prices advanced, but dropped to the RMB 65,000-65,100/mt range when SHFE copper prices dropped rapidly. Traded prices failed to hold at RMB 65,000/mt in the afternoon business, and fell to RMB 64,800-64,900/mt. Cargo-holders held offers firm on Wednesday, especially for high-quality copper. As the delivery date is coming, cargo-holders hope to trade goods at spot premiums, believing SHFE copper prices will fluctuate at high levels before the delivery date. However, weak movements in the LME copper market, rebounding US dollar, rumors of interest rate hikes in China, and falling stocks prices cast a shadow over the copper market.

Aluminum
SHFE 1103 aluminum contract prices opened slightly lower at RMB 16,420/mt, and later climbed to RMB 16,455/mt. However, the Shanghai Stock Exchange composite index remained weak, and SHFE 1103 aluminum contract prices slipped gradually as well, with the lowest prices reported at RMB 16,355/mt, and finally prices closed at RMB 16,360/mt, down RMB 105/mt. Transactions improved slightly, but total positions continued to fall slightly. Most investors took a cautious attitude, and SMM predicts SHFE aluminum prices will continue to fluctuate in a narrow band.

SHFE aluminum prices briefly climbed during spot trading hours in east China, and spot aluminum prices have fallen below RMB 16,000/mt, both attracting some buyers to make purchases. Traders moved goods actively, and trading sentiment improved slightly as a result. Spot aluminum prices were mainly between RMB 15,990-16,020/mt, with most deals made at the low-end. Buying interest became lower when SHFE aluminum prices edged lower gradually in the afternoon. 

Lead
Prices in China’s domestic lead markets fell on Wednesday to around RMB 17,000/mt, amid slumping LME lead prices and continuously quiet trading sentiment in domestic markets. At present, downstream producers are unwilling to purchase, and LME lead prices are keeping fluctuating, and expectations on the launch of China’s lead futures market in December are decreasing. For all the above reasons, domestic lead markets are unable to rise, and are expected to keep fluctuating horizontally in the near future.

Zinc
SHFE 1103 zinc contract prices mainly moved between RMB 18,350-18,450/mt on Wednesday. The US dollar index rebounded to around 80 in the afternoon session, and LME zinc prices dipped to USD 2,210/mt, both dragging down SHFE 1103 zinc contract prices, and SHFE 1103 zinc contract prices finally closed at RMB 18,105/mt, down RMB 325/mt, or down 1.76%. Trading volumes fell further by 100,000 lots to 6,588,722 lots, while positions decreased by 22,688 lots to 281,680 lots, with short positions falling signficantly.

In spot markets, #0 zinc was traded between RMB 17,800-17,850/mt, with most deals made at the low-end, and with spot discounts of RMB 600/mt against SHFE 1103 zinc contract prices, while #1 zinc was traded between RMB 17,750-17,800/mt. Market players took a wait-and-see atittude, and spot transactions were weak. SHFE 1103 zinc contract prices moved lower in the afternoon negatively affectd by LME zinc prices, and spot discounts also narrowed to around RMB 500/mt. However, the declines in SHFE 1103 zinc contract prices not only further depressed downstream buying interest, but also dampened cargo-holders’ willingness to move goods. As a result, trading sentiment became weaker in the afternoon.

Tin
Despite falling LME tin prices, prices in Shanghai tin markets rose on Wednesday, with mainstream prices above RMB 158,500/mt. Unknown brand tin was largely traded between RMB 158,500-159,200/mt, with some deals closed at RMB 158,200/mt as well; tin from Gejiu Non-ferrous Metals Processing Company was traded at RMB 159,500/mt; some transactions for tin from Yunnan Tin Group were made between RMB 159,500-160,000/mt. In general, overall trading sentiment was moderate on Wednesday. The rising prices in domestic tin markets were due mainly to limited market supply.

At present, supply from many tin producers is quite limited, and Yunnan Tin Group are keeping offers firm, coupled with other companies’ unwillingness to sell at lower prices as well, causing mainstream prices to rise gradually. Therefore, prices in domestic tin markets are able to keep firm now, due to limited market supply and volatile LME tin prices. 

Nickel
On Wednesday, LME nickel market opened at an intraday high at USD 24,000/mt and later slipped to USD 23,435/mt, with the US dollar climbing from 79.93 to 80.33 on rebound of yields of the United States government bonds. Receiving support at USD 23,435/mt, LME nickel prices later rebounded to USD 23,780/mt. LME nickel inventories were up by 180 mt to 131,592 mt.
In the Shanghai nickel spot market, traders adopted a wait-and-see attitude and were reluctant to purchase goods, while buying from downstream alloy electroplating industry was relatively active. Mainstream traded prices of nickel from Jinchuan Group were around RMB 179,000/mt and mainstream traded prices of nickel from Russia were between RMB 177,300-177,500/mt

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