SMM Daily Review - 2011/3/18 Base Metals Market

SHANGHAI, Mar. 21 (SMM) --

Copper

Supported by positive movements in the LME copper market, SHFE 1106 copper contract prices, the most active one, opened up RMB 1,970/mt at RMB 72,000/mt on Monday, with prices moving narrowly for the whole trading day. With profit-taking, SHFE three-month copper contract prices only reached RMB 72,030/mt, with resistance at the 60-day moving averages of RMB 72,191/mt, and the low-end at RMB 71,500/mt. Finally, the copper for delivery in three months closed at RMB 71,820/mt, up RMB 1,790/mt, or a gain of 2.56%. Positions for SHFE three-month copper contract prices were down 9,290 lots, while trading volumes were down 30,534 lots. SHFE three-month copper contract prices returned RMB 71,000/mt on Friday, but profit-taking indicated a cautious market attitude.  Technically, price rallies on Friday didn't recoup previous losses. Although the low-end of price fluctuating band moved higher, market uncertainties will continue to allow SHFE copper prices to move widely. 

In the spot market, offers were reported at discounts of negative RMB 200-0/mt, after SHFE copper market opened up nearly RMB 2,000/mt. Cargo-holders were reluctant to move goods due to optimistic outlook, tightening market supply. Hence, spot discounts narrowed all the way, with high-quality copper heard at premiums of positive RMB 30/mt, but traded prices stood firmly at RMB 71,000/mt for the whole trading day. Traded prices for standard-quality copper were between RMB 71,100-71,250/mt, and RMB 71,200-71,400/mt for high-quality copper. Downstream producers were not active in goods purchases as prices rose more than RMB 1,200/mt from a day earlier, but growing speculative activities made trading sentiment brisk. According to data tallied by Shanghai Futures Exchange (SHFE), copper inventories were up 19,111 mt to 177,365 mt last week.  The reason behind higher inventories may be a result of storage capacity expansion at Shanghai Logistics Metal Storage Company approved by SHFE last week.

Aluminum

 SHFE 1105 aluminum contract prices climbed rapidly to RMB 16,590/mt after opening higher at RMB 16,525/mt on Friday. Although SHFE aluminum prices lost some gains as the Shanghai Stock Exchange composite index fell slightly after opening, SHFE 1105 aluminum contract prices moved steadily and closed higher at RMB 16,550/mt, up RMB 110/mt or 0.67%. SHFE aluminum prices increased slower than SHFE copper and zinc prices due to weak trading sentiment. According to position reports, long investors built positions actively, but total positions fell by over 7,000 lots, indicating market players were generally taking a wait-and-see attitude toward market outlook, so SMM predicts SHFE aluminum prices will continue to fluctuate in the near future.

Transactions improved slightly in aluminum spot markets supported by rebounding SHFE aluminum prices, and some suppliers became unwilling to move goods given improving long sentiment in surrounding markets, while downstream producers and middlemen showed higher interest in purchases at lower prices, allowing overall trading sentiment to improve slightly. Mainstream traded prices for spot aluminum were between RMB 16,420-16,450/mt in east China, and between RMB 16,500-16,530/mt in south China.

Lead

The SHFE lead futures market will open on March 24th, boosting market enthusiasm. Despite limited downstream buying interest, traders’ transaction activities were active last Friday and raised offers, leaving unknown branded lead prices between RMB 17,350-17,400/mt, and well-known branded lead between RMB 17,500-17,550/mt in the morning. Supply of well-known branded lead was limited, and coupled with further gains in LME lead prices, long sentiment grew in China’s domestic lead markets.

The simulated SHFE lead futures market opened slightly higher last Friday, with prices narrowly fluctuating at around RMB 19,700/mt in the morning session. In the afternoon, prices rose to RMB 20,400/mt, finally closing at RMB 20,200/mt, up RMB 875/mt or up 4.53%. Trading volumes were 134,436 lots, down 3,830 lots; positions were 27,614 lots, up 8,672 lots.

Zinc

Last Friday, SHFE 1106 zinc contract prices opened higher at RMB 18,200/mt, with prices moving between RMB 18,150-18,300/mt during the day, and finally closing at RMB 18,310/mt, up RMB 300/mt, or up 1.67%. SHFE 1106 zinc contract prices rose to RMB 18,300/mt, up from RMB 17,800/mt, with total positions decreasing by 51,990 lots to 204,026 lots, and trading volumes decreasing by nearly 20,000 lots to 572,888 lots. A large number of long positions left the market after profit-taking. SHFE lead contract will begin trading on March 24th, with delivery period from September 2011 to March 2012.Large amount of capital is expected to flow to the market.

SHFE zinc prices rallied tracking LME zinc prices overnight, with SHFE 1106 zinc contract prices moving between RMB 18,150-18,250/mt. But spot transactions were rather quiet. #0 zinc was traded between RMB 17,700-17,750/mt, with discounts of RMB 520-550/mt against SHFE 1106 zinc contract prices, and with prices traded as low as RMB 17,650/mt. # 1 zinc was traded between RMB 17,650-17,700/mt.Spot discounts remained unchanged in the afternoon, and downstream buying interest was low given sufficient stocks. But traders were aggressively moving goods to generate cash, getting ready for SHFE lead contract.

Tin

Last Friday, prices in Shanghai tin markets surged boosted by significant overnight gains in the LME tin market, and limited market supply. Transactions for tin from Yunnan Tin Group, and Gejiu Zili Metallurgy Company and some minor branded tin were made between RMB 195,500-198,000/mt. In response, more downstream producers entered the market to purchase, making transactions to improve from a day earlier. Market players increased their long sentiment in view of overnight price gains in the LME tin market and strong domestic prices last Friday.

Nickel

LME nickel for delivery in three months opened at USD 24,900/mt and closed at USD 25,925/mt on March 17, up by USD 1,055/mt from a day earlier, with the highest price at USD 26,000/mt and the lowest price at USD 24,900/mt. LME nickel futures contract for delivery in three months moved stably after opening at USD 25,850/mt during the morning Asian trading hours on March 18, and advanced robustly to hit the highest at USD 26,450/mt during the afternoon trading hours. However, weighed by firm US dollar, LME nickel prices later fluctuated narrowly. LME nickel price band advanced to above USD 26,000/mt.  LME nickel inventories were down by 498 mt to 125,100 mt on March 18.

Jinchuan Group lifted ex-works nickel prices by RMB 3,000/mt to RMB 197,000/mt, and spot prices advanced in response. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 198,000-198,500/mt range, and mainstream traded prices of nickel from Russia were in the RMB 196,500-197,500/mt range. When offers were lifted in the afternoon trading hours, traders were reluctant to move goods for anticipation of higher prices in the future. In this context, transactions were largely done in the afternoon trading hours. Generally speaking, overall trading sentiment was moderate, as downstream demand was not brisk.

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