SHANGHAI. Dec. 17(SMM)--
The copper for delivery in three months in the SHFE market slid all the way after a low open at RMB 67,810/mt on Thursday, with the daily lowest and highest level of RMB 66,920/mt and RMB 67,840/mt. Finally, SHFE three-month copper contract prices closed at RMB 67,170/mt, down RMB 1,310/mt, or a drop of 1.91%. Trading volumes increased significantly by 52,674 lots, and positions were down 4,316 lots for the most actively-traded copper contract in the SHFE market, a sign of profit-taking and the results of the shift to a new contract month, and positions for SHFE 1104 copper contract were gradually increasing. The US dollar index is expected to continue to move above 80 in the short term, and this will weigh down copper prices in the short term, with greater possibility of further price corrections.
In the spot market, transactions were generally made between RMB 66,200-66,650/mt, and trading sentiment remained sluggish on Thursday. Depressed by a strong US dollar and falling LME copper prices, SHFE current-month copper contract prices opened down by RMB 400/mt on Thursday, and mainstream traded prices for SHFE 1101 copper contracts were around RMB 66,700/mt, down by about 1,000/mt from Wednesday's RMB 67,700/mt. Despite of price declines in the SHFE copper market, spot discounts failed to narrow. Spot discounts for high-quality were offered at negative RMB 250/mt at 10:30 am, and discounts for standard-quality copper were between negative RMB 350-300/mt. Spot discounts saw no improvement before the end of trading in the morning session. SHFE current-month copper contract prices rallied in the afternoon, and spot discounts expanded in response. Discounts for high-quality copper were between negative RMB 320-350/mt, and negative RMB 500/mt for hydro-copper. Despite of expanding spot discounts, downstream producers took a strong wait-and-see attitude, believing that copper prices would continue to experience corrections. Coupled with tight cash flow at the year's end, downstream producers exhibited the low purchasing interest. With profits from hedging trades, cargo-holders represented increased sentiment to move goods, even with willingness to sell goods at large discounts, and market supply improved as a result, including high-quality copper, standard-quality copper, and the rarely-seen imported copper, Spot supply will continue to increase with copper price corrections, and so spot discounts will hardly narrow in the short term, and transactions are not expected to improve as well.
SHFE 1103 aluminum contract prices, the most active one, opened low at RMB 16,530/mt on Thursday, with the highest and lowest level of RMB 16,590/mt and RMB 16,525/mt, respectively. Finally, SHFE 1103 copper contract prices closed at RMB 16,540/mt, a drop of 0.36%. Trading sentiment returned to low, with total positions down nearly by 20,000 lots. SHFE aluminum prices will continue to fluctuate in the short term.
In the spot market, discounts generally expand after a new contract month begins. However, spot aluminum prices in East China rose unexpectedly by RMB 200/mt to between RMB 16,100-16,140/mt, and spot discounts were only around negative RMB 130-90/mt. In this context, cargo-holders represented high interest in moving goods, but purchasing interest was depressed by rising prices, resulting in low buying interest. Spot aluminum prices in South China kept firm, with no significant gains. As cargo-holders maintained prices firm, buying activity was also limited.
On Thursday, SHFE 1103 zinc contract prices opened lower at RMB 18,250/mt in the morning session, and moved between RMB 18,350-18,450/mt during the day. At the end of trading, LME zinc prices rose from USD 2,250/mt due to the weakened US dollar index, with prices once touching USD 2,274/mt. As a result, SHFE three-month zinc contract prices gained and broke RMB 18,500/mt mark, with prices finally closing at RMB 18,515/mt, down RMB 280/mt, or down 1.49%, and with prices meeting pressure at 10-day moving average. Trading volumes decreased by over 60,000 lots to 789,750 lots, and total positions decreased by over 7,000 lots to 281,856 lots, with long position momentum stronger.
SHFE 1103 zinc contract prices mostly moved between RMB 18,350-18,450/mt in the morning session on Thursday. In spot markets, #0 zinc was traded between RMB 17,800-17,850/mt, with discounts of RMB 500-550/mt against SHFE 1103 zinc contract prices; #1 zinc was traded between RMB 17,750-17,800/mt. Downstream buyers purchased modestly on speculation that zinc prices may further fall, and smelters were unwilling to move goods due to slumping zinc prices. Spot discounts were between RMB 500-550/mt, unfavorable for buying spot zinc or selling SHFE zinc contracts. As a result, traders reduced purchasing. In the afternoon, spot discounts extended to RMB 600/mt in tandem with the rising SHFE 1103 zinc contract prices, and some downstream buyers purchased on an as-needed basis, with #0 zinc traded around RMB 17,900/mt.
On Thursday, prices in China's domestic lead markets continued to fall. In Shanghai markets, the RMB 17,000/mt mark had been challenged on Wednesday, with mainstream prices narrowly holding at this level on Thursday. Some deals for lead in Gejiu, Yunnan province were closed at RMB 16,950/mt, and transactions below RMB 17,000/mt failed to see obvious increases either. Possibly due to tighter capital pressure at the end of the year, some smelters in Henan province raise sales volumes slightly, mainly targeting at some downstream producers.
On Thursday, traded prices in Shanghai tin markets kept unchanged from a day earlier. Mainstream brand tin, such as Xiangxi brand tin, Feidie brand tin, as well as tin from Yunnan Tin Group was traded between RMB 159,500-160,500/mt; some tin from Gejiu Non-ferrous Metals Processing Company and Yunnan Tin Group was traded between RMB 161,500-162,000/mt, but with relatively limited trading volumes. Traders say downstream producers are unwilling to purchase at the current high price level; coupled with weak demand at the close of this year, trading sentiment has been muted recently.
On Thursday, the euro recorded the sharpest intraday decline since late December after Moody rating agency put Spain's AA1 ratings on review for possible downgrade, and the US dollar advanced in response. Weighed by higher US dollar index and lower risk appetite, LME nickel market opened at USD 24,500/mt and fell to test USD 24,290/mt. With the US dollar index weakening from 80.25 to 80.03, LME nickel climbed to the highest at USD 24,535/mt. LME nickel inventories were up by 252 mt to 131,418 mt.
In the Shanghai nickel spot market, downstream purchases were not brisk due to unclear market direction, and transactions were largely down among traders, with moderate trading sentiment reported. Mainstream traded prices of nickel from Russia were around RMB 179,500/mt and mainstream traded prices of nickel from Jinchuan Group were between RMB 180,500-181,000/mt.
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