Metals News
SMM Daily Review – 2010/12/14 Base Metals Market
smm insight
Dec 15,2010

SHANGHAI, Dec. 15 (SMM)--


The copper for delivery in three months in the SHFE market opened high at RMB 69,380/mt on Tuesday, and fluctuated at above RMB 69,000/mt before 10:00 am, failing to test RMB 69,500/mt. Later, SHFE three-month delivery copper contract prices fell below RMB 69,000/mt due to declines in domestic stocks markets and LME copper prices, down as low as RMB 68,640/mt, moving at around RMB 68,850/mt. In the afternoon session, SHFE 1103 copper contract prices tried to test RMB 69,000/mt again, but failed due to the lack of support. Finally, SHFE three-month copper contract prices closed at RMB 68,810/mt, up RMB 130/mt, or a gain of 0.19%. Positions for SHFE three-month copper contract prices were down 8,170 lots to 218,000 lots, and trading volumes fell to 218,000 lots. Technically, any further upward momentum has narrowed to an extent, highlighting price risks at high levels. 

Transactions of high-quality copper remained brisk on Tuesday before the upcoming delivery date. As the high opening in the SHFE copper market made some goods unable to enter the spot market due to losses, spot discounts were still between negative RMB 50-120/mt. Supply of domestic standard-quality copper was limited, and transactions of high-quality copper were brisk. Downstream producers were wary of purchases at prices above RMB 67,000/mt, and deals were generally made between RMB 67,400-67,500/mt, mainly by speculators. SHFE three-month and forward-month contract prices climbed higher in the afternoon session, expanding the price gap briefly to RMB 1,500/mt with SHFE current-month copper contract prices. High-quality copper was offered at spot premiums of positive RMB 20/mt, and spot discounts narrowed, with traded prices remaining in the RMB 67,400-67,500/mt range.

Wednesday is the last trading day before the delivery date, and cargo-holders will remain eager to move goods at spot premiums. At present, the price gap between SHFE 1012 and 1101 copper contract prices is RMB 500/mt, and spot discounts will expand after the delivery date if the gap between the two fails to narrow. However, cargo-holders will be very reluctant to move goods at discounts of RMB 200-500/mt following the existing supply tightness, unless prices slip in the SHFE copper market after the delivery date. Otherwise, the price gap between SHFE 1101 and three-month copper contract copper contract prices will continue to increase. The US Federal Reserve is going to announce the last interest rate meeting results for 2010 on Tuesday’s evening, and its announcement will affect market movements in the last two trading weeks of the year. 

SHFE 1103 aluminum contract prices opened at a high of RMB 16,585/mt on Tuesday, but withdrawal of long positions after profit-taking caused aluminum prices to fall rapidly. SHFE 1103 aluminum contract prices hit a low of RMB 16,495/mt, and later fluctuated narrowly around RMB 16,500/mt, and finally ended at RMB 16,525/mt, up RMB 5/mt. Trading volumes of SHFE 1103 aluminum contract were near 30,000 lots, while positions fell slightly. Positive impact from easing concerns over China’s interest rate increases was short-lived, and aluminum prices will unlikely increase significantly along with the approaching seasonal low demand period in north China. SMM predicts SHFE 1103 aluminum contract prices will continue to fluctuate until the end of 2010.

SHFE current-month aluminum contract prices failed to recover after falling in the morning session, and spot aluminum prices in east China fell in response, with prices again falling below RMB 16,000/mt. Suppliers moved goods moderately, but downstream producers and traders showed little interest in making purchases, and most of them stood on the sidelines. Transactions were weaker from a day earlier, with most deals made between RMB 15,970-16,000/mt

On Tuesday, SHFE 1103 zinc contract prices fluctuated at high levels, with prices soaring to RMB 19,335/mt in the morning session, but falling to between RMB 19,100-19,200/mt later. At the end of trading, SHFE three-month zinc contract prices slid to RMB 19,000/mt dragged down by LME zinc prices, with prices once falling to a low of RMB 18,915/mt, and pared some losses later supported by a large number of long positions. Finally SHFE 1103 zinc contract prices closed at RMB 19,065/mt, up RMB 100/mt, or up 0.53%. Trading volumes significantly increased by 160,000 lots to 877,676 lots, and total positions increased by 19,486 lots to 285,916 lots, with short position momentum stronger.

SHFE three-month zinc contract prices fluctuated at high levels on Tuesday, with prices moving between RMB 19,200-19,300/mt in the morning session and falling slightly between RMB 19,100-19,200/mt dragged down by LME zinc prices. In spot markets, #0 zinc was traded between RMB 18,450-18,500/mt, with discounts of RMB 650-700/mt against SHFE 1103 zinc contract prices; #1 zinc was traded between RMB 18,400-18,450/mt. Transactions were mainly made between traders since spot discounts extended, and the overall trading sentiment was weak. At the end of trading, spot discounts narrowed to RMB 600/mt as a result of the weakened SHFE 1103 zinc contract prices, and spot #0 zinc was mainly traded at RMB 18,400/mt, with transaction limited.

On Tuesday, traders in China’s domestic lead markets raised offers to RMB 17,250-17,300/mt in the early session tracking rising LME lead prices. However, domestic lead prices fell back to RMB 17,150-17,200/mt later due to downstream producers’ low buying interest, as well as slower rising pace in neighboring metals prices. Higher domestic lead prices are mainly depressed by the heavy capital pressure at the end of the year. In general, domestic lead prices are now slow to rise, due mainly to downstream producers’ incapability to purchase, and from smelters’ high selling interest in order to generate cash flow.

Despite continuous higher offers from traders after a high open in the LME tin market, the overall trading sentiment in domestic tin markets became down on Tuesday, due to lower buying interest among downstream producers and traders. In general, domestic tin markets exhibited rising traded prices as well as falling trading volumes. Unknown brand tin was traded between RMB 160,300-160,500/mt, and mainstream tin was traded between RMB 161,000-161,500/mt. The deferred supply of Yinsheng brand tin was quoted at RMB 160,000/mt, but failed to attract buyers. 

LME nickel market opened at USD 24,615/mt on Tuesday, and fell to test USD 24,510/mt during the early trading hours. Later, LME nickel prices climbed to USD 24,960/mt when the US dollar index fell from 79.326 to 78.99. LME nickel inventories were down by 90 mt to 130,974 mt.

In the Shanghai nickel spot market, Jinchuan Group raised ex-works nickel prices by RMB 3,000/mt to RMB 181,000/mt following LME nickel prices’ consecutive rally. Transactions were moderate on Tuesday. Mainstream traded prices of nickel from Jinchuan Group were around RMB 182,000/mt and offers from Jinchuan Group climbed to RMB 182,500/mt when LME nickel prices advanced in the afternoon trading session, while mainstream traded prices of nickel from Russia were around RMB 181,000/mt. Based on results of SMM survey, most market players believed in bullish price outlook due to expectation of mild regulatory policies.


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