SHANGHAI, Dec. 8 (SMM) –
SHFE copper market dropped at first, and then rallied on Tuesday. The copper for delivery in three months opened low at RMB 65,800/mt due to lack of strength in the LME copper market overnight, and fluctuated at around RMB 65,500/mt, feeling pressure at the daily moving average, down as low as RMB 65,180/mt. After 11:00 am, SHFE copper market rallied with rebounding LME copper prices from a weaker US dollar. In the afternoon session, SHFE copper market experienced rapid increases in positions and trading volumes due to support from LME copper prices closer to its record high level. Finally, SHFE three-month copper contract prices closed at a relatively daily high level of RMB 66,880/mt, up RMB 1,080/mt, or a gain of 1.64%. Positions for SHFE 1103 copper contracts were up 16,160 lots to 193,000 lots, and trading volumes increased to 248,800 lots. Although LME copper market exhibited significant increases in positions, with a bull trend emerging, SHFE copper market is still under the shadow of possible interest rate hikes in China, restricting price gains in the SHFE copper market. SMM believes that SHFE copper market next will point to RMB 67,000/mt.
Amid the rising sentiment, a low open in the SHFE copper market offered opportunities for traders to make bargain hunting. Spot discounts were negative RMB 70-100/mt for high-quality copper before 9:30 am, with strong purchases, and narrowed to negative RMB 50/mt before 11:00 am. With the stabilizing SHFE copper prices, spot transactions were done in a narrow price band of RMB 64,500-64,600/mt, and overall market supply remained tight, since traders were generally unwilling to move goods along with marked declines in supply and optimistic outlook. SHFE copper prices rallied with rising LME copper prices after 11:00 am, with few offers. Downstream producers were wary of purchases with rapid price rallies. Offers were up to RMB 64,700-65,000/mt, but generated little buying interest. In the afternoon session, SHFE copper prices continued to rise in tandem with rising LME copper prices which approached to the record high level, and spot discounts were between negative RMB 100-150/mt for high-quality copper, and negative RMB 150-250/mt for standard-quality copper. Spot copper prices stood above the RMB 65,000/mt mark in the afternoon, and traded prices rose from RMB 65,100-65,200/mt to RMB 65,500-65,650/mt. Trading sentiment for the whole day was brisk, which was in line with expanding trading volumes in the SHFE copper market in the afternoon session. After SHFE copper market closed, LME copper prices reached as high as USD 8,968/mt after breaking above the previous record high level.
SHFE aluminum prices were weaker than other base metals prices again on Tuesday. SHFE 1103 aluminum contract prices dipped continuously to RMB 16,410/mt after opening slightly lower at RMB 16,455/mt. SHFE 1103 aluminum contract prices rebounded following recovering Shanghai Stock Exchange composite index, and finally closed at RMB 16,505/mt, unchanged from a day earlier, but both SHFE copper and zinc prices closed with gains. The modest gains in SHFE aluminum prices recently have greatly depressed investor interest, resulting in sluggish trading sentiment and steady declines in positions. In this context, upward momentum in SHFE aluminum prices will be very limited, and more positive news is needed for SHFE aluminum prices to make breakthrough, and SMM believes SHFE aluminum prices will fluctuate in a narrow band in the short term.
Spot trading sentiment improved slightly as SHFE aluminum prices climbed slightly. Some traders were reluctant to move goods, while others were eager to sell goods for cash. However, all traders kept offers firm at RMB 16,000/mt, and most deals were made between RMB 16,000-16,030/mt in east China, and later traded prices climbed slightly. Buying interest improved slightly, but overall trading sentiment remained neutral.
On Tuesday, downstream producers in China’s domestic lead markets showed low buying interest, possibly due to the approach of low demand period at start-up battery producers in Shanghai; while smelters expressed moderate sales. LME lead prices haunted between USD 2,350-2,400/mt and failed to make a breakthrough. In response, prices in domestic markets lacked momentum to rise, mainly between RMB 17,100-17,200/mt on Tuesday, but the low-end prices are still on an upward track.
Negatively affected by LME zinc prices, SHFE 1103 zinc contract prices dipped to a low of RMB 18,260/mt after opening slightly lower at RMB 18,430/mt. Later, LME zinc prices strengthened, and domestic stock markets stabilized, both helping SHFE 1103 zinc contract prices rebound to an intraday high of RMB 18,580/mt in the afternoon session, and finally SHFE 1103 zinc contract prices closed at 18,545/mt, up 0.24%. Positions increased by 20,268 lots to 304,414 lots, while trading volumes declined by 59,920 lots to 752,428 lots, with long position momentum stronger. Technically, SHFE 1103 zinc contract prices faced heavy pressure at RMB 18,500/mt, and failed to break this level on Tuesday. Market concerns have been eased, but there is still a possibility that China will introduce more macro control policies. In the mean time, China’s macro economic data for November will be released, and market players take a cautious atittude. In this context, SMM predicts SHFE zinc prices will continue to fluctuate in the near term.
SHFE 1103 zinc contract prices slipped to between RMB 18,300-18,350/mt in the morning session, and later climbed to RMB 18,500/mt in the midday, but spot zinc prices experienced limited fluctuations. #0 zinc was traded between RMB 17,750-17,800/mt, with spot discounts of RMB 600/mt against SHFE 1103 zinc contract prices, while #1 zinc was traded between RMB 17,700-17,750/mt. In the Guangdong spot market, #0 zinc was traded between RMB 17,850-17,900/mt, while #1 zinc was traded between RMB 17,750-17,800/mt. Downstream producers chose to stand on the sidelines, and only made modest purchases at lowe prices. Downstream buying interest became lower after SHFE zinc prices inched up, keeping trading sentiment neutral.
Mainstream prices in Shanghai tin markets kept stable on Tuesday. Transactions for tin from Yunnan Tin Group were made at RMB 159,500/mt, and tin from Gejiu Non-ferrous Metals Processing Company was traded between RMB 158,500-159,000/mt, and other unknown brand tin was traded between RMB 158,000-158,200/mt. In general, overall trading sentiment was moderate on Tuesday.
The current limited market supply, coupled with traders’ low selling interest is keeping trading volumes low. Downstream producers are still cautious to purchase amid great capital pressure and weak demand, keeping trading sentiment muted.
Trading sentiment was sluggish and prices moved narrowly on LME nickel market. On Monday, LME nickel market opened at USD 23,600/mt and ended at USD 23,699/mt, up by USD 59/mt or up by 0.25% from a day earlier, with the highest price at USD 23,800/mt and the lowest price at USD 23,261/mt. Daily trading volumes were 1,385 lots and positions were 96,544 lots.
LME nickel price opened at a intraday low at USD 23,600/mt on Tuesday, and climbed to USD 24,000/mt when the US dollar index fell from 79.75 to 79.40, but later fell to around USD 23,800/mt, showing a fluctuation trend. LME nickel inventories were up by 234 mt to 131,412 mt. Commodity market is now weighed by concern over loose monetary policy from the US and the European debt crisis. Meanwhile, a slew of December economic data from China will be released by the end of this week, and some policies may also be released as well. In addition, tightening monetary policy haunted the whole commodity market.
In the Shanghai nickel spot market, Jinchuan Group raised ex-works nickel prices by RMB 3,000/mt to RMB 178,000/mt amid tepid transactions. After nickel price hike by Jinchuan Group, traders also lifted offers to RMB 178,000/mt, but buying was still not brisk. With LME nickel prices surging later on Wednesday, traders who moved goods in the morning trading session actively replenished stocks.
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