Metals News
SMM Daily Review - 2011/3/9 Base Metals Market
smm insight
Mar 10,2011

SHANGHAI, Mar. 10 (SMM) –

SHFE 1105 copper contract prices, the most active one, opened flat at RMB 71,390/mt on Wednesday, and then moved narrowly along with the daily moving averages, down as low as RMB 71,210/mt. In the afternoon session, SHFE three-month copper contract prices rallied with rising LME copper prices, but met resistance at RMB 72,000/mt, with prices fluctuating at around RMB 71,850/mt, up as high as RMB 71,990/mt. However, profit-taking by longs at the tail of the trading sent SHFE 1105 copper contract prices back to the fluctuating band seen in morning session. Finally, the copper for delivery in three months closed at RMB 71,600/mt, up RMB 210/mt, or a gain of 0.29%, failing to rise above the 60-day moving averages. Positions for SHFE three-month copper contract prices were down 3,880 lots to 151,176 lots, and trading volumes were down 77,768 lots to 110,128 lots. Positions for SHFE 1106 copper contract prices continued to increase on Wednesday, up nearly 4,900 lots. SHFE copper market experienced weak movements on Wednesday. The plunging copper prices yesterday dampened market sentiment, with great resistance at RMB 72,000/mt. SHFE three-month copper contract prices will try to gather momentum to return the 60-day moving averages in the short term.

In the spot market, the plunging SHFE copper prices yesterday resulted in a strong wait-and-see attitude, leaving spot offers unchanged from a day earlier, with spot discounts between negative RMB 50-30/mt. After 11:00 am, downstream producers entered the market for purchases along with price fluctuations of SHFE current-month copper contract prices and limited price declines, helping improve market transactions. However, supply was limited, as cargo-holders represented low selling interest.  With improved buying interest, offers for high-quality copper were quoted at premiums of positive RMB 50-70/mt, and standard-quality copper was briefly offered at discounts of RMB 0/mt due to tight supply. Transactions of standard-quality copper were made between RMB 70,750-70,850/mt in the morning session, and RMB 70,800-70,900/mt for high-quality copper. SHFE copper market rallied strongly in the afternoon session, with SHFE current-month copper contract prices up as much as RMB 500/mt. The rallying price improved market sentiment, and trading sentiment remained brisk, but some smelters refused to sell goods. Traded prices for standard-quality copper were between RMB 71,150-71,300/mt, and RMB 71,200-71,350/mt for high-quality copper in the afternoon business. Downstream producers were still active in purchases at low prices.

The Shanghai Stock Exchange composite index fluctuated on Wednesday, but showed signs of stabilizing at 3,000 points, boosting domestic financial market confidence. SHFE base metals prices rebounded, and SHFE 1105 aluminum contract prices climbed gradually to a high of RMB 16,845/mt after opening higher at RMB 16,765/mt, and finally closed at RMB 16,825/mt, up over RMB 100/mt or 0.66%. Trading volumes of SHFE 1105 aluminum contract were nearly 20,000 lots, and positions fell by 4,850 lots. Although SHFE aluminum prices rebounded, prices still moved below all moving averages, so SMM predicts SHFE aluminum prices will gain upward momentum after reversing significant losses recorded on March 8th. 

Trading sentiment improved slightly in spot markets following climbing SHFE aluminum prices, and suppliers kept offers firm at RMB 16,500/mt in anticipation of higher prices in the future, and only some lower-priced goods were supplied in the market. Downstream buying interest was up as well. Offers for spot aluminum increased to RMB 16,530/mt in the afternoon along with rising SHFE aluminum prices, and transactions improved from a day earlier. Buying interest improved as well in spot markets in south China, but overall transactions were muted, and mainstream prices were unchanged between RMB 16,550-16,570/mt, with mainstream traded prices rising slightly.

On Wednesday in China’s domestic lead markets, traders’ sentiment improved slightly as LME lead prices stabilized at around USD 2,580/mt in the morning session. In response, domestic lead prices were basically stable between RMB 17,300-17,450/mt in the morning, with well-known branded lead prices rising from overnight RMB 17,400/mt. However, overall trading sentiment was still weak, due to low downstream buying interest amid still sluggish operation. Besides, domestic base metals markets are generally weak recently, leaving traders with low market confidence. In this context, traders cut offers at RMB 17,250-17,400/mt in the afternoon despite increases in LME lead prices, indicating strong selling interest for cash flow generation. 

On Wednesday, SHFE three-month zinc contract prices opened at RMB 18,110/mt tracking LME zinc prices overnight, with prices  moving between RMB 18,100-18,200/mt in the morning session, then fell to a daily low of RMB 18,110/mt at the end of the morning session. After opening of the afternoon session, SHFE 1105 zinc contract prices rose to RMB 18,250-18,300/mt boosted by LME zinc prices, and finally closed at RMB 18,315/mt, up 125/mt, or up 0.69%. A large number of short positions left the market after profit-taking. Total positions of SHFE three-month zinc contract decreased by 25,250 lots to 235,158 lots, and trading volumes decreased by 220,000 lots to 305,660 lots. Total positions of SHFE 1106 zinc contract increased significantly by 5,774 lots to 103,188 lots, and trading volumes decreased by over 30,000 lots to 91,852 lots.

SHFE 1105 zinc contract prices fluctuated between RMB 18,150-18,250/mt, leaving the market quiet. #0 zinc was traded between RMB 17,750-17,800/mt, with discounts of RMB 400-420/mt against SHFE 1105 zinc contract prices, and #1 zinc was traded between RMB 17,700-17,750/mt. Downstream buyers purchased modestly, while traders were aggressively moving goods for arbitrage opportunities. Smelters were unwilling to sell goods at unfavorable prices, leaving the overall transaction weak. Spot discounts remained unchanged between RMB 400-450/mt in the afternoon, and spot zinc was traded between RMB 17,900-18,000/mt. But transactions were muted.

LME tin prices managed to stabilize during the European trading session on Tuesday after sharp falls in the Asian trading hours, helping ease market concerns. In response, smelters on Wednesday in domestic tin markets refused to cut offers with cost concerns, and traders were cautious after previous purchases at high prices, leaving market supply limited. Market sentiment in domestic tin markets was relatively stable on Wednesday as LME tin prices only fell slightly, with minor branded tin traded between RMB 199,500-200,000/mt, and tin from Gejiu Zili Metallurgy Company, and Yunnan Tin Group, as well as Yunheng branded tin traded between RMB 200,500-201,500/mt. Downstream producers and traders made some purchases, and overall trading sentiment was quiet.

LME nickel futures contract for delivery in three months fell from USD 27,480/mt on March 8 and received support at USD 26,215/mt after falling below 60-day moving average. Supported by decline in international oil price, rally in equity market and rebound of LME copper prices, LME nickel prices pared most losses and closed at USD 27,025/mt during the evening trading hours on March 8th, down by USD 425/mt from a day earlier. Daily trading volumes were 5,731 lots and positions were 111,787 lots. Due to temporarily eased concern and improved expectation on economy recovery outlook, LME nickel futures contract for delivery in three months opened at USD 26,900/mt on March 9, and fluctuated narrowly between USD 27,115-27,175/mt in the afternoon Asian trading hours. LME nickel inventories were down by 444 mt to 128,658 mt.

Uncertainties in international energy market and possible tightening measures adopted by Chinese government to counter inflation still oppressed investors. However, stable movement of LME nickel price during the Asian trading hours eased market concern to certain extent. Although downstream purchases were not active, transactions between traders to replenish stocks increased. Traded prices of nickel from Russia were largely in the RMB 206,600-207,000/mt range. Jinchuan nickel holders were reluctant to move goods at prices below RMB 208,500/mt, supported by Jinchuan Group's ex-works prices at RMB 211,000/mt.


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