SHANGHAI, June 23 (SMM) –
On Tuesday, SHFE copper market opened high, and generally moved above the daily moving average, despite of several failures to hit new highs. SHFE copper for delivery in three months, the most active one, fell as low as RMB 52,500/mt after opening at RMB 52,720/mt, and bounced back at 10:00 am due to rallying stocks market, reaching as high as RMB 53,140/mt. In the afternoon session, SHFE September delivery copper prices fluctuated in a narrower band, and moved lower at the tail of closing following withdrawal of longs before prices ended at RMB 52,840/mt, up RMB 130/mt or 0.25%. Total positions were down 3,870 lots, with turnover rate of 280%. Although SHFE September delivery copper prices now come under pressure at RMB 53,000/mt, the most active copper contract has been well above the 5-day moving average. Coupled with upward trend available based on technical indicators, SMM believes SHFE September delivery copper prices will fluctuate in the RMB 52,000-53,000/mt range.
In the spot market, most downstream producers opted to stand on the sidelines in view of wild price fluctuations on the SHFE copper market. Suppliers remained reluctant in moving goods, with limited sales of imported copper, and domestic goods were quoted firm at premiums of positive RMB 200/mt, leaving gap of premiums between domestic and imported copper, high-quality and low-quality copper only around RMB 50/mt. Transactions were mainly done in the RMB 53,200-53,400/mt range, but trading sentiment dropped from a day earlier. Spot copper prices have climbed above RMB 53,000/mt, but cautious attitude should be taken in view of actual spot trades.
SHFE aluminum prices opened lower, and retreated after trying to move higher twice. SHFE 1009 aluminum contract prices opened at RMB 14,800/mt, and later edged higher to RMB 14,890/mt, but then slipped at 10:00 am following domestic stock markets, with prices dipping to RMB 14,710/mt before closing at noon. SHFE 1009 aluminum contract prices mainly fluctuated narrowly around the daily moving average in the afternoon, and finally closed at RMB 14,770/mt, down RMB 190/mt, or down 1.27%. Positions of SHFE 1009 aluminum contract declined by 4,610 lots, and total positions dropped by 5,944 lots, while trading volumes decreased as well. Although SHFE aluminum prices closed with slight declines, prices still stood above the 5-day moving average, so SHFE 1009 aluminum contract prices are expected to move between RMB 14,700-15,000/mt in the near term.
Positive impact from China's currency move has faded gradually, and macro economic news was mixed. Non-CHALCO alumina producers cut alumina prices by RMB 100/mt to RMB 2,500/mt on June 21st, and prices for imported alumina declined as well. Losses suffered by aluminum producers narrowed as a result of lower alumina prices, and the support from production costs for aluminum prices became weaker amid recent significant changes in macro economic environment.
In the spot market, market offers remained at a discount of RMB 30-50/mt against SHFE 1007 aluminum contract prices recently, with deals mainly made between RMB 14,540-14,580/mt. SHFE aluminum prices were again facing upward pressure, and cargo-holders were eager to move goods, but they still kept offers firm. Downstream producers and some speculators stood on the sidelines after entering the market actively on June 21st, with the aluminum market in surplus. Whether or not spot aluminum prices can hold steady at RMB 14,500/mt will depend on LME aluminum price trends and China's A-shares market movements, and market sentiment will determine the transactions.
SHFE 1009 zinc contract prices moved narrowly after opening slightly higher at RMB 14,650/mt, and later soared to as high as RMB 14,910/mt buoyed by strengthening domestic stock index futures market, but SHFE 1009 zinc contract prices dropped rapidly to RMB 14,750/mt later dampened by stronger selling pressure from short positions. SHFE 1009 zinc contract prices finally closed at RMB 14,810/mt, and total trading volumes reached 1.78 million lots, and positions of SHFE 1009 zinc contract increased by 4,522 lots to 250,000 lots Struggles between long and short positions remained intense, but short positions momentum was stronger, with the turnover rate of 710%.
In the spot market, #0 zinc was traded between RMB 14,620-14,650/mt in the Shanghai market, with spot discounts moving between RMB 80-120/mt against SHFE 1009 zinc contract prices. #1 zinc was traded in the RMB 14,600-14,620/mt, and market supplies were relatively limited. Trading sentiment weakened significantly in the Shanghai spot market, and downstream consumers preferred to stay out of the market. However, zinc market sentiment was bullish in north China amid recent upward trends of zinc prices, with downstream producers making purchases actively.
Domestic lead prices have climbed for six trading days in a row since Chinese Dragon Boat Festival holiday, with a cumulative gain of nearly RMB 1,000/mt, and now have approached RMB 15,000/mt. During Tuesday's morning business, traders quoted prices as high as RMB 14,900-15,000/mt following higher LME lead prices. However, brisk trading sentiment seen a day earlier failed to persist on Tuesday, as downstream producers needed time to absorb rapid and large price gains. In this context, transactions in the Shanghai market were traded between RMB 14,800-14,850/mt, with limited deals. Traded prices in the afternoon trade fell to RMB 14,700-14,800/mt along with no signs of further upward momentum on the LME lead market and low downstream acceptance towards prices.
In recent days, transactions are traded at premiums of positive RMB 100-200/mt over price offers released by SMM. Costs at domestic lead producers and optimistic outlook in the short term will leave upward room for domestic lead prices.
LME tin prices opened at USD 17,690/mt and closed at USD 18,000/mt on June 21st, up USD 375/mt from a day earlier, with the highest price at USD 18,250/mt and the lowest price at USD 17,600/mt. Daily trading volumes were 518 lots and positions were 17,515 lots. Boosted by China's RMB exchange rate reform, the Asian equity markets strengthened and the US dollar weakened. Although the market digested the news and price slipped during the European trading period, prices still closed with gains. On June 22nd, LME tin prices opened at USD 18,050/mt and gradually fell to test the lowest intraday level of USD 17,450/mt. This is due to the fact that any details concerning RMB exchange rate reform were not revealed, lending limited support to boost the market.
In the Shanghai tin spot market, domestic major brand smelters lifted offers to certain extent on June 22nd, affected by significant LME tin price increase on June 21st. Traders tentatively lifted their offers in the morning trading session, but the actual traded prices lowered due to weakening LME tin price on June 22nd and sluggish downstream consumption. Traded prices of major brand tin were between RMB 139,500-141,000/mt and traded prices of unknown brand tin were around RMB 139,500/mt. Market extended the sluggish transactions. With limited supply of goods in the market, some traders who recently had replenished stocks move their goods extremely cautiously given the extremely tin profit available, and the price decline also dampened their willingness to move goods. Tin spot prices may hard to climb as buyers had more initiatives in the current market, and domestic spot prices stagnated.
LME nickel prices opened at USD 19,800/mt and closed at USD 19,649/mt on June 21st, down USD 49mt from a day earlier, with the highest price at USD 20,418/mt and the lowest price at USD 19,591/mt. Daily trading volumes were 2,308 lots and positions were 88,970 lots. On June 22nd, LME nickel prices opened at USD 19,700/mt, reaching the highest level at USD 19,793/mt and touching the lowest level at USD 19,350/mt. Impact from RMB exchange rate reform on base metal market is waning.
In the Shanghai nickel spot market, transactions were moderate due to stable nickel prices. Traded prices of nickel from Jinchuan Group were between RMB 154,500-155,500/mt, and traded prices of imported nickel were between RMB 153,500-154,000/mt, with relatively high level of spot inventories reported in the market. Some traders replenished stocks when LME nickel prices slipped, with trading sentiment largely moderate, and purchasing interest from downstream companies remained unchanged.
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