SHANGHAI, Feb. 16 (SMM) --
Supported by a new record high of LME copper prices and its positive closing, SHFE 1105 copper contract prices, the most active one, opened high by RMB 430/mt at RMB 76,700/mt on Tuesday, setting a new high since May 2006. After a high open, SHFE three-month copper contract prices fluctuated at around RMB 76,700/mt, waiting for the release of major economic data for January due on Tuesday. The SHFE copper market experienced no significant movements along with the announcement of the data, since the results were generally within market expectations. However, the rallying US dollar index at the tail of the trading sent SHFE copper prices slightly down along with LME copper prices, narrowing daily gains, down as low as RMB 76,060/mt. Finally, the copper for delivery in three months in the SHFE market closed at RMB 76,100/mt, up RMB 100/mt, or a gain of 0.13%. Positions for SHFE three-month copper contract prices were up 2,058 lots to 197,908 lots, while trading volumes were down 3,984 lots to 128,904 lots. Technically, SHFE three-month copper prices stood firm at the 5-day moving averages. According to official data, China’s CPI for January was 4.9%, and China may not raise the reserve requirement ratio or other tightening measures in the short term. With the approach of the peak demand period, the outlook for copper prices will remain long in the medium and long term, and will continue to test new highs along with LME copper price trends in the short term.
In the spot market, Tuesday was the last trading day for SHFE current-month copper contract prices, and the gap between SHFE current-month and SHFE 1103 copper contract prices neared RMB 600/mt. Premiums for high-quality copper were at around positive RMB 150/mt, and positive 30-50/mt for standard-quality copper. Sales of high-quality copper remained strong, gradually increasing the price difference between high-quality and standard-quality copper. During major spot trading hours, the price difference between SHFE current-month and SHFE 1105 copper contract prices briefly reached RMB 2,000/mt. In this context, cargo-holders increased premiums, with offers up to positive RMB 180-200/mt for high-quality copper, and positive RMB 50-80/mt for standard-quality copper. Transactions were mainly made between RMB 74,850-75,000/mt. Some suppliers were not eager to move goods for cash, as traded prices would be higher after a new contract month begins, and the sentiment was stronger among cargo-holders of standard-quality copper. In addition to brisk arbitraging trading, some downstream producers entered the market due to the steadily rising copper prices. In this context, market transactions were brisker compared with a day earlier. In the afternoon session, the price gap between different contract prices narrowed, and spot premiums narrowed to around positive RMB 50-150/mt as a result, leaving lower trading sentiment in the afternoon business.
SHFE aluminum prices were weak on Tuesday, with SHFE 1104 aluminum contract prices opening higher at RMB 17,115/mt. China’s CPI for January was released at 10:00 am, dampening any increases in SHFE base metals prices. SHFE 1104 aluminum contract prices fell as well due to weak consumption, with prices finally closing at a low of RMB 17,050/mt, down RMB 60/mt compared with the previous trading day, or down 0.36%. Trading volumes of SHFE 1104 aluminum contract were 6,428 lots, and total positions increased by 2,765 lots. SHFE aluminum prices were mainly moving below the daily moving average, and increased significantly slower than other base metals prices. Although China’s CPI data for January was lower than expectations, investors remained cautious toward transactions due to concerns that new monetary tightening policies will be introduced to combat inflationary pressure, so SMM predicts SHFE 1104 aluminum contract prices will struggle around RMB 17,100/mt in the short term. SHFE 1105 aluminum contract will become more active on Wednesday after transitioning into a new contract month, and positions of SHFE 1105 aluminum contract increased significantly on Tuesday.
Traded prices for spot aluminum were between RMB 16,780-16,810/mt in east China, with discounts of RMB 0-20/mt against SHFE current-month aluminum contract prices. SHFE aluminum prices increased at a slower pace than other base metals prices, with SHFE current-month aluminum contract fluctuating around RMB 16,800/mt. Spot aluminum supplies were sufficient, and although middlemen showed high interest in buying, downstream buying interest remained low. Mainstream traded prices for spot aluminum fell gradually, and market transactions were neutral.
In China’s domestic lead markets, downstream producers resumed production, but LME lead prices failed to consolidate the USD 2,600/mt mark on Tuesday. In this context, most downstream producers remained unclear about price prospects in domestic lead markets, and thus were unwilling to accept Tuesday’s high prices, resulting in limited transactions. Smelters kept normal production during the Chinese New Year holiday period while downstream producers were offline, leading to swelling inventories at smelters. Coupled with the current capital pressures, smelters showed high selling interest. Mainstream traded prices in domestic lead markets were RMB 17,100-17,300/mt on Tuesday.
On Tuesday, SHFE 1105 zinc contract prices opened higher at RMB 19,750/mt tracking LME zinc prices overnight, with prices mostly moving between RMB 19,700-19,800/mt in the morning session. China’s CPI for January was up 4.9%, higher than the preliminary figure of 4.6%, and which is being absorbed by the market. In the afternoon, dragged down by the falling LME zinc prices and the weakening Shanghai Stock Exchange composite index, SHFE 1105 zinc contract prices fell and finally closed at RMB 19,620/mt above the 5-day moving average. Trading volumes increased by over 10,000 lots to 434,114 lots, and total positions increased slightly by 2,516 lots to 223,310 lots, with long position momentum stronger. All SHFE zinc contract prices stood at RMB 19,000/mt mark, and future contract prices even climbed to RMB 20,000/mt level, supporting zinc prices to further rise.
Spot zinc prices rose along with SHFE zinc prices. #0 zinc was traded between RMB 18,950-19,000/mt, with discounts of RMB 800/mt against SHFE 1105 zinc contract prices, but with transactions at the high end limited. #1 zinc was traded between RMB 18,850-18,900/mt. Spot discounts remained unchanged at RMB 800/mt in the midday when SHFE zinc prices fell slightly, but #0 zinc was traded between RMB 18,930-18,950/mt. Market players were taking a wait-and-see attitude, and transactions were still limited at lower prices. SHFE zinc prices continued to fall in the afternoon, and spot discounts narrowed to RMB 750/mt, with transactions even weaker.
In Shanghai tin markets, mainstream prices continued to surge on Tuesday, with tin from Yunnan Tin Group, Yunnan Gejiu Zili Metallurgy Company, and some minor branded tin traded between RMB 198,500-202,000/mt. Boosted by sharp gains in LME tin prices, traders in Shanghai tin markets constantly raised offers on Tuesday. But trading volumes were limited, and downstream producers were purchasing on an as-needed basis due to high prices, with strong wait-and-see sentiment.
LME nickel market opened at USD 28,730/mt during the Asian trading hours on February 15th, and extended upward momentum from lower-than-expected data from China. In the afternoon trading hours, LME slipped due to brief rally of the US dollar, with prices hitting the highest at USD 29,000/mt. LME nickel inventories were down by 174 mt to 130,248 mt.
In the Shanghai nickel spot market, Jinchuan Group raised ex-works nickel prices to RMB 218,000/mt, boosting spot nickel prices. However, high prices slowed downstream purchases. Traders also told that transactions were relatively quiet in spot market. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 218,500-219,000/mt range, and mainstream traded prices of nickel from Russia were in the RMB 217,000-218,000/mt.
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