SHANGHAI, June 9 (SMM) --
On Tuesday, SHFE copper market continued to fall to its daily limit after opening, and moved below the daily moving average for most of trading day, as weakening stocks markets dampened hopes of rebounding. The September delivery copper contract on the SHFE copper market opened at RMB 49,550/mt, dropping as low as RMB 48,800/mt, and with sell-offs reported after reaching up to RMB 50,050/mt. Positions for SHFE September delivery copper contract were up 26,668 lots, with trading volumes at 771,642 lots. Total positions reached up to 216,676 lots, with trading valued at more than RMB 190 billion, and with the turnover rate of 356%.
In the short term, struggle between short and long positions at RMB 50,000/mt will be intense, and any downward momentum has moderated after sharp drops. Despite of strong short sentiment, if Dow Jones index succeed to stop falling after tumbling for three days because of favorable US data, LME copper prices will find a brief support at USD 6,000/mt. In this context, SHFE copper prices will represent a small round of technical rebound around a Dragon Boat festival holiday.
In the spot market, premiums reemerged after the SHFE/LME copper price ratio revised to 8.0. Spot premiums rallied from positive RMB 50~200/mt, especially in the afternoon when SHFE copper prices were pressed, helping premiums advance to positive RMB 100~300/mt. Transactions in the morning business were traded between RMB 49,850-50,050/mt, and traded prices fell to price band of RMB 49,600~50,000/mt. SMM expects great resistance for spot prices to break out RMB 50,000/mt. Prices for high-quality copper were firm before a Dragon Boat festival holiday and the upcoming delivery date. Stabilizing LME copper prices stimulated buying interest from downstream producers, and speculators as well.
China will announce a series of major data in late week, and expectations of inflation will be under control, reducing possibility of higher interest rates in the short term, and leaving a mixed view for base metals market.
SHFE aluminum prices opened lower, but then recovered during the spot trading period following rebounding stock markets, and later soared along with surging LME aluminum prices before closing, with prices finally closing with increase. SHFE 1009 aluminum contract prices opened lower at RMB 14,070/mt, and then dipped to RMB 14,020/mt at 10:00 a.m., with prices ending at RMB 14,150/mt at noon. LME aluminum prices rebounded to USD 1,900/mt before closing in the afternoon, stimulating SHFE 1009 aluminum contract prices to close at RMB 14,310/t, up RMB 185/mt, or up 1.31%. Positions of SHFE 1009 aluminum contract declined by 12,374 lots, and trading volumes were 105,518 lots, with trading value exceeding RMB 7.47 billion. Positions of all SHFE aluminum contracts experienced declines, with total positions falling by 23,528 lots, indicating short positions withdrew from the market temporarily, and SHFE aluminum prices will likely undergo corrections around RMB 14,500/mt in the short term.
In the spot market, overall trading sentiment was bullish amid recovery in both LME and SHFE aluminum prices, and most deals were made at the level flat at SHFE current-month aluminum contract price, and some branded aluminum or warrants were even made at a premium of RMB 10-20/mt against SHFE current-month aluminum contract prices, with traded prices climbing from RMB 13,800/mt to RMB 13,850/mt in the afternoon. However, market expectations of sustainable rebound in aluminum prices on June 9th drop slightly given significant increases in aluminum prices yesterday (June 8th), and the upward movements for spot aluminum prices to RMB 14,000/mt will be uneven.
Domestic lead prices were stable on Tuesday, supported by rallying LME lead prices. Prices were quoted between RMB 13,500-13,600/mt in the Shanghai market, and prices for well-known branded goods were about RMB 100/mt higher. Although lead prices showed a trend of stabilizing, downstream producers showed no strong buying interest, as base metal prices remain on a downward track. At present, domestic lead producers maintain prices firm, with unwillingness to move goods, but spot supply was available, since a inter-market arbitrage window has opened after LME lead prices plunged more than USD 200/mt over 6 trading days.
SHFE 1009 zinc contract prices fluctuated narrowly around RMB 13,600/mt after opening lower, with prices dipping to as low as RMB 13,480/mt in the morning session. Later, SHFE 1009 zinc contract prices pared previous losses supported by growing long positions, and finally closed at RMB 13,810/mt as large amounts of short positions exited the market after profit-taking. Positions declined by 15,000 lots, but short positions still dominated SHFE zinc market, with the pessimistic sentiment unchanged.
In the spot market, zinc prices stabilized gradually yesterday. #0 zinc was mainly traded between RMB 13,350-13,450/mt in Shanghai market, with transactions improving significantly from a day earlier. However, downstream purchases were still limited. Although market players have accepted current lower zinc prices, downstream producers remain cautious about purchases, since zinc prices will likely fall further given that macro economic news exerts greater impact on current zinc prices.
LME tin prices opened at USD 15,951/mt lots and closed at USD 15,700/mt on June 7th, down USD 300/mt from a day earlier, with highest price at USD 16,150/mt and the lowest price at USD 15,500/mt. Daily trading volumes were 625 lots and positions were 18,395 lots. The euro fell to a four-year low versus the US dollar below 1.19 for the first time, weighing down on base metal prices. Market players are focusing on the Hungary for the concern over possible expanding of European debt crisis. On June 8th, LME tin prices opened at USD 15,775/mt and reached the highest level at USD 16,000/mt as of 16:00, with price gradually stabilizing to certain extent.
In the Shanghai tin spot market, prices continued to fall amid wait-and-see sentiment. Supply of goods from traders was limited in the market. Unknown brand tin dominated market transactions with traded prices between RMB 136,000-137,000/mt, and few major brand tin was traded at RMB 137,000-139,500/mt. Prices were on downward track and wait-and-see sentiment was extremely strong in the market. Many smelters ceased to quote offers temporarily as current market prices were too low. Trader believed it was not appropriate to replenish stocks at current price level and they were waiting for a clear price trend in the future. Adopting a wait-and-see attitude, downstream consumers only made purchases on an as-needed basis and they preferred to use tin with more favorable prices. In this context, overall trading sentiment was relatively sluggish.
LME nickel prices opened at USD 17,900/mt and closed at USD 18,450/mt on June 7th, up USD 385/mt, with highest price at USD 18,500/mt and the lowest price at USD 17,375/mt. Daily trading volumes were 2,832 lots and positions were 89,474 lots. LME nickel prices opened at USD 18,400/mt on June 8th and reached the highest level at USD 18,490/mt, with prices surging to test USD 18,450/mt after testing low level at USD 18,100/mt, still fluctuating weakly.
In the Shanghai nickel spot market, overall transactions were slightly stable. Mainstream traded prices of nickel from Jinchuan Group were between RMB 149,500-150,000/mt and mainstream traded prices of imported nickel were between RMB 147,000-149,000/mt. Transactions were dominated by traders, while only few end-users entered the market, with ample supply of goods in the market. Premium increased for goods in bonded area. Costs at domestic NPI sector increased in certain regions due to electricity price hikes and it still takes time for domestic inventories to be consumed.
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