SMM Daily Review - 2011/3/23 Base Metals Market

SHANGHAI, Mar. 24 (SMM) --

Copper

SHFE 1106 copper contract prices, the most active one, opened up by RMB 120/mt at RMB 71,380/mt on Monday, and fluctuated narrowly at around the daily moving averages after the opening. After the beginning of the second trade session, SHFE three-month copper contract prices rallied with rising stocks and LME copper prices. Coupled with gathering longs, SHFE 1106 copper contract prices climbed above RMB 72,000/mt, reaching as high as RMB 72,150/mt, but then fell back at the 20-day moving averages. In the afternoon session, SHFE three-month copper contract prices fluctuated at around RMB 71,900/mt, far above the daily moving averages. Finally, the copper for delivery in three months in the SHFE market closed at RMB 719,80/mt, down RMB 720/mt, or a gain of 1.01%. Positions for SHFE three-month copper contract prices were up 4,818 lots, while trading volumes were down 15,480 lots. Rubber, as a leading indicator, showed strong performance on Wednesday, and the trading of SHFE lead futures market from Thursday will boost market sentiment. However, SHFE three-month copper prices still face great resistance at RMB 72,000-73,000/mt, leaving difficulties for price rallies.

In the spot market, spot premiums were between positive RMB 20-80/mt in the morning business as SHFE copper prices fluctuated narrowly. Transactions were moderate, and downstream producers adopted a wait-and-see attitude. Traders entered the market for purchases at low prices in the morning business, and then became eager to move goods for cash generation as SHFE copper prices rallied rapidly, narrowing spot premiums for cash generation. Offers for standard-quality copper were briefly quoted at discounts of negative RMB 80-50/mt, generating strong buying interest from traders, with goods nearly being sold out before the end of trading at the midday. Traded prices for standard-quality copper were between RMB 71,300-71,500/mt, and RMB 71,350-71,550/mt for high-quality copper in the morning business. In the afternoon session, SHFE copper prices fluctuated at high levels, improving market sentiment, and then spot offers changed into spot premiums, with offers between RMB 0-positive RMB 50/mt. Traded prices for standard-quality copper were between RMB 71,550-71,600/mt, and RMB 71,600-71,650/mt for high-quality copper in the afternoon business. Smelters and traders became unwilling to move goods at low prices, while downstream producers only made purchases on an as-needed basis, negatively affecting trading sentiment. Speculators continued to dominate market transactions.

Aluminum

 SHFE 1105 aluminum contract prices opened slightly higher at RMB 16,660/mt on Wednesday. Later, as the Shanghai Stock Exchange composite index held steady at 2,900 points, and LME aluminum prices strengthened to test USD 2,600/mt, SHFE 1105 aluminum contract prices continued to moved higher to break through recent resistance level of RMB 16,700/mt, with prices finally closing at RMB 16,715/mt, up RMB 55/mt compared with the previous trading day, or up 0.33%. SHFE aluminum prices opened high and moved higher on Wednesday, with prices closing with gains for four consecutive days supported by rising production costs resulting from higher energy prices. Although SHFE 1106 aluminum contract failed to become the most actively traded contract, SHFE 1105 aluminum contract and SHFE 1106 aluminum contract prices stabilized above the 10-day moving average, and total positions increased by 3,452 lots to 282,120 lots. SMM predicts SHFE 1106 aluminum contract will become the most actively traded contact on Thursday, with prices expected to move higher and find solid support at RMB 16,800/mt. 

Traded prices for spot aluminum were between RMB 16,520-16,540/mt in east China on Wednesday, with discounts of RMB 50-70/mt over SHFE current-month aluminum contract prices. SHFE aluminum prices fluctuated higher slightly in the morning session, helping push up spot aluminum prices to above RMB 16,500/mt. A small number of traders sold goods at lower prices between RMB 16,500-16,510/mt for cash in morning trading, attracting middlemen to make purchases aggressively. Later, spot offers increased slightly during mainstream trading hours following SHFE aluminum price trends, but weak consumption caused most deals to be made at the low-end of price range, with overall market sentiment remaining sluggish. Offers were firm at RMB 16,540/mt in spot aluminum markets in afternoon trading, and almost no deals were made, but market players became more optimistic toward market outlook.

Lead

On Wednesday in China’s domestic lead markets, smelters and traders were even more unwilling to move goods and kept offers firm, with well-known branded lead quoted between RMB 17,700-17,750/mt, and unknown branded lead above RMB 17,600/mt. Although downstream producers refused to accept currently high prices, traders still insisted on firm offers, waiting for the SHFE lead futures market to be launched on March 24th. In the afternoon, traders still kept offers firm, but more downstream producers began to inquire and increased purchases.

Zinc

On Wednesday, SHFE 1106 zinc contract prices opened at RMB 18,205/mt and moved around RMB 18,250/mt in the morning session. In the midday, the US dollar index dipped to 75.5, and LME zinc prices surged to USD 2,370/mt, up from RMB 2,330/mt, both driving up SHFE 1106 zinc contract prices to RMB 18,460/mt, and with prices further touching RMB 18,735/mt then fluctuating between RMB 18,550-18,650/mt. SHFE 1106 zinc contract prices finally closed at RMB 18,600/mt, up RMB 540/mt, or up 2.99%, above the 5-day moving average. Trading volumes increased by over 4,000 lots to 536,932 lots, and total positions decreased by 14,230 lots to 223,862 lots. A large amount of cash will flow to the market since SHFE lead contracts start trading on March 24th.
SHFE 1106 zinc contract prices moved around RMB 18,250/mt. Spot discounts in Shanghai market remained at RMB 500/mt against SHFE 1106 zinc contract prices, with #0 zinc traded around RMB 17,750/mt. Spot discounts extended to RMB 600/mt along with the rising SHFE zinc prices, with traded prices above RMB 18,000/mt. In the afternoon, #0 zinc was traded as much as RMB 18,100-18,200/mt in Guangdong market, but with downstream buying interest low. Traders increased purchases given extending spot discounts, with transactions mainly made between traders.

Tin

On Wednesday in Shanghai tin markets, prices rose significantly, with tin from Yunnan Tin Group and some minor branded tin traded between RMB 197,500-199,000/mt. Supply of low-priced goods was limited, and overall trading sentiment was moderate, as downstream producers were still purchasing on an as-needed basis. Market confidence improved due to steadily rising LME tin prices, boosting prices in Shanghai tin markets to rise.

Nickel

LME nickel for delivery in three months opened at USD 26,750/mt and closed at USD 26,640/mt on March 22, down by USD 350/mt from a day earlier, with the highest price at USD 26,750/mt and the lowest price at USD 26,200/mt. LME nickel for delivery in three months fluctuated higher after opening at USD 26,350/mt during the Asian trading hours on March 23, and reached the highest at USD 26,650/mt, with quiet trading sentiment reported. LME nickel prices began to rebound after excessive decline, but softened later due to negative macro factors.

In the Shanghai nickel spot market, trading sentiment was quiet due to decline in LME nickel prices on March 22. When LME nickel prices rebounded at around 11:00 on March 23, spot prices were boosted higher. Mainstream traded prices of nickel from Jinchuan Group were around RMB 198,000/mt, and mainstream traded prices of nickel from Russia were in the RMB 196,800-197,000/mt range. Traders were reluctant to move goods and lifted offers higher when LME nickel prices rallied in the afternoon trading hours, but transactions at high price were limited, with afternoon trading volumes smaller than morning trading volumes. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 198,000-198,300/mt range, and mainstream traded prices of nickel from Russia were in the RMB 196,800-197,300/mt range.

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