SMM Daily Review - 2011/3/22 Base Metals Market

SHANGHAI, Mar. 23 (SMM) --

Copper

SHFE 1106 copper contract prices, the most active one, opened down RMB 660/mt at RMB 70,880/mt on Tuesday. After the opening, SHFE three-month copper contract prices rallied after finding support at the 5-day moving averages of RMB 70,800/mt, reaching as high as RMB 71,670/mt, with brisk buying activity. In the afternoon session, SHFE three-month copper contract prices moved narrowly at around RMB 71,500/mt, but dropped along with falling LME copper prices at the tail of the trading.  Finally, the copper for delivery in three months in the SHFE market closed at RMB 71,280/mt, down RMB 260/mt, or a loss of 0.36%. Positions for SHFE three-month copper contract prices were up 2,210 lots, while trading volumes were up 15,452 lots. Technically, SHFE copper market still met strong resistance at the 20-day moving averages of RMB 72,000/mt, despite of standing above the 5-day moving averages. Several failures to make breakthrough in the SHFE copper market indicates its uneven road for prices to rally, and uncertainties in Japan's nuclear power plant and the turmoil in the Middle East will add risks to prices. 

In the spot market, spot premiums were little changed from recent levels in early business, as SHFE copper market moved higher after a low open. Spot premiums were offered between positive 50-150/mt at around 10:30 am. With copper futures prices rallying, spot offers were heard between RMB 0-positive RMB 100/mt. Traded prices for standard-quality copper were between RMB 70,950-71,100/mt, and RMB 71,000-71,200/mt for high-quality copper in the morning business. As SHFE copper prices rose in the afternoon session, spot premiums changed into spot discounts, with offers for "Guixi" brand copper at positive RMB 0/mt. But, traded prices stood above RMB 71,000/mt, ranging from RMB 71,100-71,300/mt.  Downstream producers chose to stand on the sidelines after previous stock replenishment at lower prices, while traders had to sell goods at discounts, so as to improve transactions. Hence, the overall trading sentiment dropped from a day earlier.

Aluminum 

SHFE 1105 aluminum contract prices opened slightly higher at RMB 16,610/mt on Tuesday, and later fluctuated higher, with prices losing some gains at the tail of trading and finally closing at RMB 16,660/mt, up RMB 90/mt compared with the previous trading day, or up 0.54%. SHFE aluminum prices were still stronger than other base metals prices, with prices closing with gains for three consecutive days. SHFE 1105 aluminum contract prices held steady at RMB 16,600/mt, and positions of SHFE 1105 aluminum contract fell by 1,496 lots, while positions of SHFE 1106 aluminum contract increased by 4,924 lots. Weak market fundamentals will hamper any gains in SHFE aluminum prices in the short term, and SMM predicts the high-end of SHFE 1105 aluminum contract prices will climb to between RMB 16,700-16,800/mt. 

Traded prices for spot aluminum were between RMB 16,480-16,500/mt in east China on Tuesday, with discounts of RMB 50-70/mt over SHFE current-month aluminum contract prices. SHFE aluminum prices climbed further in the morning session, helping boost spot aluminum prices, but weak consumption caused spot discounts to widen significantly. Traders were staying on the sidelines, with overall market sentiment still sluggish. In the afternoon session, driven up by high SHFE aluminum prices, traders kept offers firm at RMB 16,500/mt, but buying interest was low, with almost no deals made in spot markets.

Lead

On Tuesday in China’s domestic lead markets, downstream producers lowered their buying interest compared with a day earlier due to volatile LME lead prices, and traders were cautious as well given that they already had some stocks. In general, overall trading sentiment was lower from the past two days. However, lead ingot prices did not fall, with well-known branded lead traded between RMB 17,600-17,650/mt, and unknown branded lead traded at around RMB 17,500/mt. Smelters refused to move goods and even quoted offers above currently high-end prices, an indication of high anticipation of the coming SHFE lead futures market. The simulated lead futures trade closed on Tuesday, and SHFE will formally launch the lead futures market on March 24th.

Zinc

On Tuesday, SHFE 1106 zinc contract prices opened at RMB 17,820/mt, with prices fluctuating between RMB 17,900-18,000/mt in the morning session, and then rose to RMB 18,000-18,100/mt tracking LME zinc prices. Total positions once increased by over 20,000 lots. In the afternoon, SHFE 1106 zinc contract prices rose to RMB 18,100/mt, and finally closed at RMB 18,180/mt, up RMB 110/mt, or up 0.61%, with prices meeting pressure at the 5-day moving average, but finding support at RMB 17,800/mt. Total positions increased by 7,076 lots to 238,092 lots, and trading volumes decreased by over 20,000 lots to 532,058 lots, with long positions struggling with short positions. SHFE zinc prices are expected to fluctuate widely before SHFE lead contracts start trading.

As SHFE zinc prices rose along with LME zinc prices in the morning session, spot zinc prices rose in response. #0 zinc was traded between RMB 17,500-17,600/mt in the morning session, with discounts of RMB 450/mt against SHFE 1106 zinc contract prices. #1 zinc was traded between RMB 17,450-17,500/mt. Spot discounts in Shanghai market extended to RMB 500/mt, with spot zinc traded above RMB 17,650/mt. In Guangdong spot market, #0 zinc was traded as much as RMB 17,800-17,850/mt. Downstream buying interest was low due to the RMB 300/mt increases, leaving spot transactions quiet.

Tin

On Tuesday in Shanghai tin markets, mainstream traded prices were basically flat from a day earlier. Tin from Yunnan Tin Group, and some minor branded tin traded between RMB 196,000-198,000/mt. In general, overall trading sentiment kept muted on Tuesday. Stricken by the unrest in Libya, more market players were standing on the sideline, but market supply was still limited and lent strong support to tin prices. Hence, prices in Shanghai tin markets were in a deadlock, unable to rise and resistant to fall.

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