Metals News
SMM Daily Review - 2011/3/11 Base Metals Market
smm insight
Mar 14,2011

SHANGHAI, Mar. 14 (SMM) --
SHFE 1105 copper contract prices, the most active one, opened down RMB 190/mt at RMB 69,350/mt on Friday. After opening, SHFE three-month copper contract prices moved narrowly above the daily moving averages, with the high-end at RMB 69,950/mt. In the afternoon session, SHFE three-month copper contract prices fell along with declines in the LME copper market, losing daily gains, with prices down as low as RMB 69,100/mt. Finally, the copper for delivery in three months in the SHFE market closed at RMB 69,220/mt, down RMB 320/mt, or a loss of 0.46%. Positions were down 9,368 lots, and trading volumes were down 43,064 lots. SHFE three-month copper contract prices remained weak, with limited support from the longs, and the resistance at the RMB 70,000/mt mark remained heavy. SHFE copper market will continue to drop.

In the spot market, SHFE copper prices briefly rallied in the morning session after a low open. Spot offers were heard at premiums of positive RMB 120-200/mt. Traded prices for standard-quality copper were between RMB 69,550-69,650/mt, and RMB 69,600-69,750/mt for high-quality copper in the morning business. In the afternoon business, spot premiums were little changed along with diving prices in the SHFE copper market, but traded prices were down RMB 400/mt. Traded prices for standard-quality copper were between RMB 69,250-69,550/mt, and RMB 69,300-69,600/mt for high-quality copper. Downstream producers were still showing purchasing interest towards goods priced below RMB 70,000/mt, and market supply was ample, resulting in brisk trading sentiment. According to data tallied by Shanghai Futures Exchange (SHFE), copper inventories were up 489 mt to 158,254 mt last week.

SHFE 1105 aluminum contract prices opened higher at RMB 16,805/mt on Friday. SHFE 1105 aluminum contract prices climbed to struggle around the daily moving average following other base metals prices in the morning session boosted by China’s CPI data for February. Since the Japan earthquake dragged down Asian stock markets in the afternoon session, the Shanghai Stock Exchange composite index tumble, causing SHFE 1105 aluminum contract prices to lose previous gains. Finally, SHFE 1105 aluminum contract prices closed at RMB 16,760/mt, down RMB 5/mt compared with the previous trading day, or down 0.03%. The situation of strong SHFE forward aluminum contracts and weak SHFE nearby aluminum contracts remained unchanged on Friday, and SHFE 1105 aluminum contract prices were still reversing previous losses, and SMM predicts SHFE 1105 aluminum contract prices will continue to struggle around RMB 16,800/mt in the short term in view of the persistent pessimistic sentiment.

Traded prices for spot aluminum in east China were between RMB 16,530-16,550/mt, with discounts of RMB 0-20/mt against SHFE current-month aluminum contract prices. SHFE current-month aluminum contract prices held steady at RMB 16,500/mt in the morning session, helping boost spot aluminum prices. Traders became willing to move goods at higher prices for cash, but buying interest remained low, and mainstream traded prices fell gradually, with overall market sentiment remaining sluggish. The falling SHFE aluminum prices in the afternoon session dragged down spot aluminum prices, with mainstream traded prices falling to between RMB 16,510-16,520/mt. Only middlemen made limited purchases as traders were unwilling to move goods at lower prices, with trading sentiment still sluggish. 

Last Friday in China’s domestic lead markets, market confidence improved slightly due to relatively positive performance in the LME lead market in the morning. In response, traders kept offers stable from Thursday’s afternoon, with traded prices between RMB 17,050-17,200/mt. Market supply of lead from Gejiu, Yunnan province was limited last Friday. Downstream producers were more willing to accept current prices compared with early week’s high prices, and increased buying interest to an extent, leaving overall trading sentiment moderate. However, transactions returned sluggish in the afternoon due to slumps in base metals markets.

Last Friday, SHFE 1105 zinc contract prices fluctuated at low levels, with prices moving between RMB 17,800-17,900/mt in the morning session. In the midday, the Shanghai Stock Exchange composite index fell as a result of the earthquake in Japan, dragging down SHFE 1105 zinc contract prices to fall below the daily moving average. Finally, SHFE 1105 zinc contract prices closed at RMB 17,745/mt, up RMB 25/mt, or up 0.14%. Total positions decreased by 11,706 lots to 217,002 lots, and trading volumes decreased by 50,000 lots to 277,576 lots. Total positions of SHFE 1106 zinc contract increased significantly by 6720 lots to 124156 lots, and trading volumes decreased by over 30,000 lots to 120660 lots.

SHFE 1105 zinc contract prices rallied to fluctuate below RMB 18,000/mt level, and spot zinc prices rose in response. #0 zinc was traded between RMB 17,500-17,530/mt, with discounts of RMB 380-420/mt against SHFE 1105 zinc contract prices. #1 zinc was traded between RMB 17,400-17,450/mt. In the afternoon, spot discounts narrowed to RMB 370-380/mt as a result of the falling SHFE zinc prices, and with spot zinc traded around RMB 17,400/mt.The market was taking a wait-and-see attitude due to falling zinc prices, which contributed from Japanese earthquake. As a result, transactions were quiet in the afternoon.

Last Friday in Shanghai tin markets, mainstream tin smelters with ample cash flows retained low selling interest on cost concerns, since they failed to buy low-priced raw materials without support of relevant preferential policies. Traders were reluctant to cut offers as well due to relatively high costs, but began to move goods for speculations in view of consecutive days of price declines. Prices for tin from Gejiu Zili Metallurgy Company and Yunnan Tin Group were cut down for sales promotion. Besides, some transactions were also made for minor branded tin such as Jinlong and Nanshan branded tin. In general, prices in Shanghai tin markets are inch down recently, with mainstream traded prices between RMB 197,000-199,500/mt last Friday.

The downgrade of Spanish credit rating deteriorated the European debt crisis, weighing significantly on the euro. In this context, investors' risk aversion sentiment grew, leading to the rebound of the US dollar index. In response, LME nickel faced strong sell-off pressure last Thursday, with prices fluctuating widely in the USD 25,600-26,200/mt range and finally closing at USD 26,065/mt, down by USD 111/mt from a day earlier. Daily trading volumes were 4,124 lots and positions were 111,389 lots. During last Friday's Asian trading hours, the US dollar advanced due to earth quake in Japan. LME nickel futures contract for delivery in three months opened at USD 26,025/mt and slipped all the way to hit the lowest at USD 25,600/mt. LME nickel inventories were down by 180 mt to 128,424 mt.

Jinchuan Group cut ex-works nickel prices again by RMB 8,000/mt to RMB 203,000/mt. When LME nickel prices fluctuated narrowly around USD 26,000/mt in the morning trading hours, buying interest was relatively strong in the market. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 203,300-203,500/mt range, and mainstream traded prices of nickel from Russia were around RMB 201,500/mt, with trading volumes of nickel from Russia increasing to certain extent. When LME nickel price performance was sluggish in the afternoon trading hours, spot transactions almost stagnated. Recent nickel prices have been affected by negative news.


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