SHANGHAI, Dec. 20 (SMM) –
SHFE copper market opened lightly higher on Friday, and generally moved upward during the trading day. The copper for delivery in three months in the SHFE market largely fluctuated between RMB 67,600-67,850/mt in the morning session after opening at RMB 67,400/mt. With rising LME copper prices, SHFE three-month copper contract prices advanced above RMB 68,000/mt, and hovered at RMB 68,250/mt after 11:00 am, and finally closed at a daily high level of RMB 68,460/mt, up RMB 1,070/mt, or a gain of 1.59%. Positions for SHFE three-month copper contract prices were down by 210 lots to around 215,000 lots after declines in the afternoon session, and trading volumes were more than 200,000 lots. SHFE copper market found support at above RMB 67,000/mt, but met resistance at RMB 68,500/mt, a sign of cautious sentiment in the domestic copper market.
Spot discounts expanded further on Friday. Discounts were between negative RMB 250-350/mt when SHFE current-month copper contract prices moved above RMB 67,000/mt, with deals made between RMB 66,850-66,950/mt. After SHFE current-month copper contract prices rose to RMB 67,500/mt, spot discounts expanded to negative RMB 350-450/mt, with traded prices up to RMB 66,900-67,200/m. Although SHFE copper prices fell slightly back from highs, spot discounts expanded further to negative RMB 400-500/mt, and negative RMB 600-650/mt for hydro-copper, and transactions were done in the RMB 66,900-67,100/mt. Market supply increased on Friday, but demand was weak, leaving depressed transactions. Cargo-holders, with eagerness to move goods at high prices, increased spot discounts for cash generation. However, downstream producers generally stood on the sidelines along with cautious purchasing attitude at high prices and tight cash flow at the year’s end, resulting in sluggish transactions.
According to the data tallied by Shanghai Futures Exchange (SHFE), copper inventories soared by 11,872 mt to 127,836 mt in the week ending December 17th, an indication that rising copper prices depressed downstream purchasing interest, and that expanding spot discounts made smelters and cargo-holders choose to delivery goods at the delivery date.
Trading sentiment in the SHFE aluminum market remained lackluster on Friday, with a narrow price fluctuating band. SHFE 1103 aluminum contract prices, the most active one, opened at RMB 16,540/mt and closed at RMB 16,570/mt, up RMB 15/mt, with the highest and lowest level of RMB 16,605/mt and RMB 16,540/mt, respectively. Any price gains in the SHFE aluminum market were weaker than increases in the SHFE copper and zinc market. SHFE aluminum market is expected to test the 30-day moving averages in the short term.
Downstream buying interest improved slightly due to the need for stock replenishment at the weekend and continuous price increases. However, this didn’t mean an optimistic view towards its outlook among the market, and buying activity on Friday happened when prices were low. Spot aluminum prices advanced slightly to RMB 16,140-16,170/mt in East China, while prices were RMB 16,240-16,260/mt in South China, with deals generally made at the low-end.
Last Friday, some traders in China’s domestic lead markets planned to raise offers given LME lead prices stabilizing above USD 2,400/mt, but downstream producers were unwilling to accept prices above RMB 17,000/mt. Coupled with traders’ needs to generate cash flow at the end of this year, prices in domestic lead markets did not rise last Friday and little changed from a day earlier, barely holding at RMB 17,000/mt. Some downstream producers entered the market to purchase given the relatively stable LME lead prices and their needs of production over the weekend, helping improve transactions slightly.
Standard & Poor's raised China's long-term sovereign credit rating last Thursday. In this context, SHFE three-month zinc contract prices opened slightly higher at RMB 18,505/mt last Friday, with prices moving between RMB 18,650-18,700/mt in the morning session. In the midday, SHFE 1103 zinc contract prices climbed to between RMB 18,700-18,750/mt in tandem with LME zinc prices, and finally closed at RMB 18,780/mt, up RMB 335/mt, or up 1.82%. Trading volumes decreased by 160,000 lots to 623,528 lots, and total positions slightly increased by 2,798 lots to 284,654 lots. The transaction was weak, with long position momentum flat at short position momentum.
In spot market, zinc spot prices rose along with SHFE 1103 zinc contract prices. #0 zinc was traded between RMB 18,100-18,150/mt, with discounts of RMB 600-650/mt against SHFE 1103 zinc contract prices; #1 zinc was traded between RMB 18,050-18,100/mt. As to fluctuating zinc prices trends, downstream buyers took a wait-and-see attitude. Traders purchased modestly since spot discounts were between RMB 600-650/mt, unfavorable for buying spot zinc or selling SHFE zinc contracts. Goods supplies available in the market were sufficient despite smelters were unwilling to sell goods.
Last Friday, mainstream prices in Shanghai tin markets were unchanged from a day earlier. Tin of brands such as Xiangxi, Jinlong, Nanshan, coupled with tin from Yunnan Tin Group was traded between RMB 159,500-161,000/mt. Market supply remained low, and overall trading sentiment was moderate.
President of IMF announced optimistic outlook on Spanish medium economy on December 17th, and believed that Spain’s economy condition will not become a threat to euro. In this context, the US dollar index fell from 80.035 to 79.69. LME nickel prices opened at USD 24,700/mt, and largely moved between USD 24,659/mt and 24,759/mt, with the highest price at USD 24,765/mt and the lowest price at USD 24,650/mt. On December 17th, LME nickel inventories were up by 444 mt to 131,862 mt.
In the Shanghai nickel spot market, Jinchuan Group raised ex-works nickel prices again by RMB 3,000/mt to RMB 184,000/mt following price increase by RMB 3,000/mt on December 14th. In this context, traded prices of nickel from Jinchuan Group also climbed to between RMB 182,500-183,000/mt, while mainstream traded prices of nickel from Russia were between RMB 181,500-182,000/mt. Transactions of nickel from Jinchuan group were largely done between traders who were optimistic toward price outlook, as time is still needed for market to accept price hike from Jinchuan Group.
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