SMM Daily Review - 2011/2/11 Base Metals Market

SHANGHAI, Feb. 12 (SMM) --

Copper

SHFE copper 1105 contract, the most active one, opened RMB 170/mt higher at RMB 76,050/mt on Friday given that the LME copper market closed up on Thursday. SHFE copper prices rose rapidly to hit a new high of RMB 76,550/mt after opening, but fell to below the day moving average of RMB 76,300/mt at 10:00 am after longs’ profit-takings, and rallied to the moving average level ten minutes later supported by investors bargain-hunting. In the afternoon, trading volumes dropped significantly. SHFE copper prices failed to receive support from advance of Shanghai Stock Exchange Composite Index amid rebound of US dollar. In response, SHFE copper prices tumbled further following the weaker LME copper market, hitting as low as RMB 75,300/mt. SHFE copper prices rallied at the tail of trading due to shorts exit, and finally closed RMB 360/mt lower at RMB 75,520/mt, down 0.47%. SHFE copper 1105 contract positions significantly increased by 10,452 lots to 181,422 lots, and trading volumes also sharply rose by 49,262 lots to 156,100 lots. Although the SHFE copper market closed with declines on Friday, prices were still above the 5-day moving average and had ever hit a new high, and day moving averages were showing obvious upward momentum. If LME copper prices cannot stand above USD 10,000/mt in the short term and fall below the 10-day moving average, SHFE copper prices may experience great declines for the near future, but with long-term upward trend unchanged. SHFE copper prices are expected to continue to test stability of the 5-day moving average following LME copper price movement later.

In Shanghai spot markets, refined copper spot discounts were negative RMB 30-200/mt in the morning on Friday, with standard-quality copper traded between RMB 74,100-74,150/mt and high-quality copper between RMB 74,200-74,300/mt. Spot discounts narrowed due to less price gap between the SHFE copper current-month contract and the 1105 contract, especially for high-quality copper with discounts narrowing from RMB 100/mt to RMB 30/mt. Supply of high-quality copper was limited and offers were firm, but transactions were still active. But transactions of standard-quality copper were relatively sluggish. In the afternoon, copper spot discounts turned to be premiums as SHFE copper prices fell further, with standard-quality copper spot premiums of RMB 30-50/mt and high-quality spot of about RMB 100/mt. A new contract will start next Tuesday, and spot premiums are expected to retain, with fewer arbitragers due to less price gap between forward and near term futures contracts. SHFE copper inventories increased by 9,899 mt to 144,197 mt last week, up over 15 kt around the Chinese New Year holiday period, indicating ample supply and weak demand, which will curb higher copper prices to an extent.

Aluminum

SHFE 1104 aluminum contract opened slightly higher at RMB 17,065/mt and closed at RMB 17,090/mt, up by RMB 55/mt, or up by 0.32% from a day earlier, due largely to stable performance of Shanghai Stock Exchange composite index despite of decline of zinc and copper prices, with the highest price at RMB 17,150/mt and the lowest price at USD 17,040/mt. SHFE aluminum was the only base metal reporting gains on February 11th. SHFE aluminum positions increased to around 60,000 lots, with a large amount of positions shifting to SHFE 1105 aluminum contract. SHFE aluminum prices were resilient compared to other base metals on February 11th, with long power obviously stronger than short power. SHFE aluminum prices are not likely to fall easily once find opportunities to advance. Since consumption hasn’t recovered at present, SHFE aluminum prices are accumulating momentum to rise further in the future.

In the Shanghai aluminum spot market, spot traded prices were between RMB 16,740-16,760/mt, with discount against SHFE 1102 aluminum contract between RMB 50-30/mt a price. Growth of spot aluminum prices was limited and traded prices slipped to certain extent, by virtue of correction after surge of SHFE aluminum price and given ample market supply. However, more traders and downstream producers took the opportunity of current low price to make purchase. In the south China aluminum spot market, purchases were limited as most traders were still closed on holiday, despite that prices increased slightly to RMB 16,840-16,860/mt. SMM expects that trading sentiment in spot market may improve to certain extent after the Lantern Festival.

Lead

In China’s domestic lead markets, inquirers increased on Friday although most downstream producers were still closed. Offers for # 1 refined lead were RMB 17,050-17,250/mt reported on SMM. Trading volumes in Shanghai markets rose significantly compared with the past two trading days, with well-known brand lead traded between RMB 17,000-17,050/mt and lead from “Gejiu”, Yunnan province at RMB 16,950/mt. With less price advantages for lead from “Gejiu”, transactions were mainly done for well-known brand lead.

Zinc

On Friday, SHFE three-month zinc contract prices opened higher with prices hitting RMB 19,745/mt in the morning session, but then fell to RMB 19,400-19,500/mt. Dragged down by the stronger US dollar index and the dropping LME zinc prices, SHFE 1105 zinc contract prices further dipped and finally closed at RMB 19,305/mt, down RMB 260/mt, or down 1.33%, and with prices meeting resistance at the 5-day and 10-day moving averages. Trading volumes increased by 160,000 lots to 413,358 lots, and total positions increased by 27,640 lots to 194,760 lots, with balanced power between longs and shorts.

SHFE zinc prices fluctuated widely, and spot zinc prices fell in response. #0 zinc was traded between RMB 18,700-18,750/mt. Spot discounts against SHFE 1105 zinc contract prices narrowed to RMB 700/mt. #1 zinc was traded between RMB 18,650-18,700/mt. Traded prices of #0 zinc fell to RMB 18,700/mt when SHFE zinc prices further dipped at the end of trading, and with mainstream traded prices between RMB 18,670-18,680/mt. Spot discounts narrowed as deliveries near, and zinc prices should not further fall. In this context, some traders took a wait-and-see attitude, leaving the market still quiet.

Tin

On Friday, SHFE tin prices continued to rise, with traded brands increasing. But transactions were still lackluster. Some brands such as “Yunxiang”, “Xiangxi” and “Yinsheng” were traded at RMB 191,500/mt in the morning session, and a few downstream buyers purchased modestly. Some traders raised tin prices to RMB 193,000/mt in the afternoon, leaving transactions weak. Some traders were cautious at higher prices.

Nickel

LME nickel market opened at USD 28,320/mt during the Asian trading hours on February 11th, and moved stably in the morning trading session. However, LME nickel prices slipped significantly in the afternoon trading session and hit the lowest at USD 27,900/mt due to rally of the US dollar. LME nickel inventories were down by 786 mt to 131,112/mt.
In the Shanghai nickel spot market, traded prices slipped to certain extent from day earlier. Prices were relatively firm n the morning trading session, with nickel from Jinchuan Group traded between RMB 216,500-217,000/mt, and nickel from Russia traded around RMB 216,000/mt. In the afternoon trading session, nickel from Jinchuan Group was traded between RMB 216,000-216,500/mt, with low end price at RMB 215,000/mt, and nickel from Russia was traded around RMB 215,500/mt. Transactions were largely done in the morning trading session, and sluggish in the afternoon trading session. Supply of nickel from Russia was still limited, and market expects that some imported nickel from Russia will arrive in the Market.

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