[Minor metal] SMM Analysis of Manganese Prices

SHANGHAI, July 28 (SMM) --
&nbsp;&nbsp;&nbsp; Copper 
&nbsp;&nbsp;&nbsp; SHFE copper tracked the rising LME copper prices, but advanced at a slower pace. SMMI.Cu rallied 0.55%, with spot prices rising to RMB 44,000/mt. However, downstream producers became cautious with regard to purchases, with spot premiums in the RMB 0-150/mt range.
&nbsp;&nbsp;&nbsp; China's imports of refined copper were 378.9 kt during June, soaring 400% YoY, and YTD imports were 1.78 million mt, surging 160% YoY. China's copper imports reached a new high in June. Market concerns towards oversupply depressed increases of SHFE copper prices.
&nbsp;&nbsp;&nbsp; Spot markets reported no significant surpluses due to limited supply of imported goods, resulting from limited spot premiums and hedging activities for some imports.&nbsp;
&nbsp;&nbsp;&nbsp; According to domestic economic statistics during 2Q, the Central Government's stimulus package has taken effect, helping boost rapid growth of new construction projects. According to the National Bureau of Statistics, China's copper semis apparent consumption was 947.4 kt in June, up 22.6% YoY, with YTD apparent consumption at 4.53 million mt, down 8.97% YoY. China's copper semis output kept growing at 8% during 1H 2009, stimulated by the Central Government's RMB 4 trillion investment plan, and home appliance, automobile incentive policies in rural areas.
&nbsp;&nbsp;&nbsp; However, downstream producers became cautious as copper prices showed strong performance during the seasonal low demand period, with orders expected to drop in the short term. Currently, downstream inventories are low, and producers made purchases on an as-needed basis, leaving moderate transactions.
&nbsp;&nbsp;&nbsp; Aluminum&nbsp;
&nbsp;&nbsp;&nbsp; SHFE aluminum prices strengthened slower due to depressed spot market performance. SHFE aluminum prices climbed above RMB 14,000/mt, supported by the soaring LME aluminum prices last Thursday, with spot discounts expanding to RMB 50/mt. Transactions improved slightly over the past week, as downstream producers gradually accepted current high prices, and as some traders also joined in purchasing activities.
&nbsp;&nbsp;&nbsp; Declines in imports and strong consumption in China are reasons behind declines in domestic aluminum inventories. With sustained stable growth in domestic demand, domestic aluminum producers will not likely suffer heavy losses again. In this context, SHFE aluminum prices will continue to advance next week, testing support above RMB 14,000/mt.&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp; Lead 
&nbsp;&nbsp;&nbsp; Domestic lead markets lacked momentum to keep pace with the rising LME lead prices, given present ample market supply and depressed end-user consumption. Downstream producers generally made purchases according to orders, leading to lackluster transactions in spot markets. Trades were made in the RMB 13,150-13,300/mt, failing to rise to RMB 13,400-13,500/mt.
&nbsp;&nbsp;&nbsp; Despite of high costs, domestic lead smelters faced difficulties in maintaining prices, negatively affected by low-priced goods from smaller or newer lead producers. Inventories at major trading markets experienced limited changes and remained high.
&nbsp;&nbsp;&nbsp; Zinc 
&nbsp;&nbsp;&nbsp; Buying interest two weeks ago, when zinc prices were relatively low was higher than this past week. Recent zinc price increases in domestic markets, supported by the rising LME zinc prices made many downstream producers adopt a wait-and-see attitude. Coupled with previous stock replenishment, trading sentiment in domestic spot markets was relatively weak over the past week. Most market players became cautious when zinc spot prices approached RMB 13,800/mt, and market confidence was low when zinc prices were above RMB 14,000/mt, given over 200 kt of inventories, depressed consumption from no improvement in downstream demand. If SHFE zinc prices continue to rise, domestic spot zinc markets will suffer more pressures.
&nbsp;&nbsp;&nbsp; In addition, market supply of imported zinc dropped along with the increasing discounts for imports, with imports mainly from Australia, Japan, Namibia, India, Brazil and Kazakhstan.&nbsp;
&nbsp;&nbsp;&nbsp; SHFE zinc prices rallied along with the higher LME zinc prices, with prices rising to RMB 14,000/mt, but met resistance at the price level. The average traded price of 0 # zinc in the Shanghai market was RMB 13,505/mt, up RMB 534/mt from a week earlier. Offers of imported zinc were around RMB200-300/mt lower than 0909 contracts due to depressed spot markets, with the average weekly price of RMB 13,460/mt, up RMB 565/mt on a weekly basis.
&nbsp;&nbsp;&nbsp; Tin&nbsp; 
&nbsp;&nbsp;&nbsp; Last week, domestic tin ingot prices strengthened due to the rising LME tin prices, with prices returning to RMB 110,000/mt, though demand showed no positive responds. High-priced tin ore prices made producers unwilling to move goods, and traders were reluctant to buying goods for fear of price declines, tightening market supply. Trades in domestic goods were mainly for goods from Yunnan Tin Company (YT Brand), and supply of goods from Yunnan Chengfeng Non-ferrous Metals Company Limited (Yunheng Brand) and other companies was limited.
&nbsp;&nbsp;&nbsp; Downstream industries are in seasonal low demand period, resulting in depressed transactions. Some smelters planned to sell goods around RMB 110,000/mt in order to ease cash flow and reduce inventories at the end of the month. In this context, domestic tin prices will possibly advance at a slower pace compared with LME tin prices.
&nbsp;&nbsp;&nbsp; Nickel 
&nbsp;&nbsp;&nbsp; The price spread between domestic and overseas markets increased again, as high inventories depressed spot nickel markets. Market transactions were lackluster, with trades mainly done among traders, and increases of spot prices in domestic markets slowed. Traders became unwilling to sell goods at low prices after the price spread between domestic and overseas markets expanded. After prices rose, both downstream producers and traders showed limited interest in purchases in view of ample supply. Therefore, domestic nickel markets were in stalemate.&nbsp;
&nbsp;&nbsp;&nbsp; The price spread between domestic and overseas markets expanded along with the strong LME nickel prices, indication of ample spot supply in domestic markets. Profits for trades made among traders were very slim, only at RMB 200/mt, due to declines of low-priced goods, resulting from growing hedging activities with increasing price spread.
&nbsp;&nbsp;&nbsp; Market players believe the labor strike at Vale Inco's nickel mine will probably affect raw material supply to factories in Asia, but Sumitomo Metal Mining is planning to raise output by 4,595 mt, to 19,500 mt, during 2H 2009. The company's output during 1H 2009 was 13,700 mt, down 23% from the plan made in earlier year. Most analysts believe nickel demand during 2009 will be less than market supply.&nbsp;
&nbsp;&nbsp;&nbsp; However, utilization rates at stainless steel plants in foreign countries continue to improve, with operating rates at Japanese expected to reach 70%. This increased capacity utilization, combined with China's nickel imports in June, is creating upward momentum for nickel prices.&nbsp;
&nbsp;&nbsp;&nbsp; In the short term, US dollar trends and performance of other base metals will continue to dominate LME nickel prices, due to a lack of strong market fundamentals. Technically, total positions will continue to grow, and LME nickel prices will remain above the 5-day moving average, with prices expected to fluctuate in the USD 15,700-16,500/mt range next week.
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