SHANGHAI, Dec. 29 (SMM) --
The copper for delivery in three months in the SHFE market opened high at RMB 69,000/mt on Tuesday, standing above the 5-day moving averages, and rose all the way to reach RMB 69,440/mt. However, SHFE three-month copper contract prices fell back at around 10:40 am due to falling prices in domestic stocks market, and then rallied to around RMB 69,100/mt after down as low as RMB 68,560/mt. Finally, SHFE three-month copper contract prices closed at RMB 69,000/mt, up RMB 100/mt or a gain of 0.15%. Positions for SHFE 1103 copper contract prices were down 6,588 lots, while positions for SHFE 1104 copper contract prices were up 9,850 lots. Positions for all copper contracts in the SHFE market were up 2,330 lots, but trading volumes fell by 10,468 lots, a sign that both longs and shorts remain cautious. SHFE copper market remained strong despite of falling stocks prices. SHFE three-month copper contract prices will test RMB 69,500/mt in the short term, and may reach RMB 70,000/mt, if LME copper prices advance.
SHFE current-month copper contract prices moved stably between RMB 68,250-68,400/mt before 10:40 am after opening at RMB 68,400/mt. In this context, spot discounts were around negative RMB 400/mt for high-quality copper at 10:30 am, and negative RMB 500-550/mt for standard-quality copper. Traders were eager to move goods for cash generation at high levels, especially for standard-quality copper, with discounts at above RMB 600/mt. Transactions were made between RMB 67,850-68,050/mt, but trading sentiment was low. Copper prices in the SHFE market dropped significantly at around 10:45 am, and spot discounts narrowed slightly to negative RMB 350/mt for high-quality copper, but remained at around negative RMB 550/mt for standard-quality copper, with traded prices down rapidly to RMB 67,500-67,800/mt. However, downstream purchasing interest was low. SHFE current-month copper contract prices fell below RMB 68,000/mt at around 11:00, but rallied after down as low as RMB 67,800/mt, and prices generally fluctuated at around RMB 68,200/mt in the afternoon session. In this context, spot discounts were still at around negative RMB 350/mt for high-quality copper, and negative RMB 500-550/mt for standard-quality copper, with traded prices up to RMB 67,650-68,000/mt.
At present, downstream producers and traders remain wary of purchases. Coupled with credit banking at banks, weak demand, high copper prices, any upward momentum in spot copper market will be restrained. Hence, it is expected that spot discounts will not improve significantly and transactions will remain sluggish during the last trading days of 2010.
The Shanghai Stock Exchange composite index fell significantly on Monday, but SHFE aluminum prices rebounded following other base metals prices, but the upward momentum in SHFE aluminum prices was much weaker than copper and zinc prices. SHFE 1103 aluminum contract prices opened at RMB 16,710/mt, with the highest level and the lowest level at RMB 16,745/mt and RMB 16,660/mt, respectively, and finally closed at RMB 16,695/mt, down RMB 15/mt compared with the previous trading day. SHFE aluminum was the only one metal closing with declines among all base metals, and trading volumes remained low at 30,000 lots, and positions for SHFE 1104 aluminum contract increased gradually, with total positions falling by 1,282 lots. The long position momentum gained on SHFE market after China raised the interest rate, but SHFE aluminum prices were neutral. SMM predicts aluminum prices will continue to fluctuate in a narrow band before any improvement in capital conditions.
Spot markets remained sluggish, and some traders have entered the year-end settlement period, with trading volumes declining significantly. Market supplies in east China were relatively tight compared with buyer demand, and trading sentiment improved slightly as a result, but overall trading volumes were limited, and traded prices were still between RMB 16,180-16,210/mt, with spot discounts between RMB 180-210/mt against SHFE current-month aluminum contract prices.
Although LME closed on Tuesday, SHFE metals especially SHFE zinc showed strong gains. Coupled with optimism about LME lead prices after reopening on Wednesday, prices in China’s domestic lead markets stabilized on Tuesday, with traders and lead producers quoting offers unchanged from a day earlier. Mainstream traded prices were RMB 16,750-16,850/mt. After consuming some of the inventories bought previously, downstream producers showed higher buying interest, and trading sentiment improved slightly as well.
On Tuesday, SHFE zinc prices gained ahead of all the other metals. In the morning session, SHFE zinc prices opened slightly higher at RMB 18,750/mt and then stabilized at RMB 18,900/mt. SHFE zinc prices dipped later to RMB 18,740/mt dragged down by the weakened stock markets, but fluctuated above RMB 19,000/mt when SHFE copper prices slumped, with prices finally closing at RMB 19,060/mt, up RMB 350/mt, or up 1.87%. Positions increased significantly in the midday but decreased sharply by RMB 24,876/mt in the end. Transactions were improved as a result of long positions' closing positions after profit-taking. Trading volumes increased significantly by 220,000 lots to 586,480 lots, and total positions decreased by 24,876 lots to 223,246 lots. Total positions of SHFE 1104 zinc contracts increased by 42,398 lots, which were more actively traded. The performances of SHFE zinc prices help improve speculations that metal prices will further rise.
SHFE three-month zinc contract prices fluctuated between RMB 18,750-18,900/mt in the morning session. Spot transaction was still weak. #0 zinc was traded between RMB 18,100-18,150/mt, with discounts of RMB 650-700/mt against SHFE 1103 zinc contract prices; #1 zinc was traded between RMB 18,050-18,100/mt. Downstream buyers purchased moderately due to tight cash flow, and traders also reduced purchasing due to unfavorable spot discounts. In the afternoon, spot discounts extended to RMB 700-800/mt when SHFE 1103 zinc contract prices broke RMB 19,000/mt mark. As to zinc price trends, some market players believe prices will rebound after experiencing narrow corrections. As a result, offers from downstream buyers grew, but some traders were unwilling to sell goods due to unfavorable discounts. Spot transaction did not improve much in the afternoon.
In Shanghai tin markets, traders reflected sluggish demand and quiet transactions on Tuesday. Traded prices remained unchanged, and few transactions were made for high-priced goods. Nanshan and Xiangxi brand tin was traded between RMB 160,500-161,000/mt; tin from Gejiu Non-ferrous Metal Processing Company and Yunnan Tin Group was traded between RMB 161,500-162,000/mt. Most transactions were made for minor brand tin. Some market players believe trading volumes were hard to grow at the current price levels and amid the weak demand, and were planning to move goods after LME opened on Wednesday.
Trading sentiment was lackluster during holiday period as investors temporarily retreated from market. RMB appreciated due to interest rate hike from China, and the US dollar index fell from 80.29 to 79.89 in response, favoring LME nickel prices.
In the Shanghai nickel spot market, downstream demand was relatively limited and trading sentiment was still lackluster. Mainstream traded prices of nickel from Jinchuan Group were between RMB 183,000-183,200/mt, with average price at RMB 183,100/mt, up by RMB 350/mt from a day earlier. Mainstream traded prices of nickel from Russia were between RMB 182,000-182,200/mt, with average price at USD 182,100/mt, up by RMB 350/mt. Guided by the US dollar index, some traders believed that LME nickel prices may reverse weak trend on December 29th, so they were reluctant to move goods, particularly goods from Jinchuan Group. Ex-works nickel from Jinchuan Group was still firm at RMB 184,000/mt.
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