Metals News
SMM Daily Review - 2011/3/24 Base Metals Market
smm insight
Mar 25,2011

SHANGHAI, Mar. 25 (SMM) --


Supported by positive movements in the LME copper market, SHFE 1106 copper contract prices, the most active one, opened up RMB 1,170/mt at RMB 72,950/mt on Monday. After the high opening, SHFE three-month copper contract prices moved lower, with the daily high level at RMB 72,980/mt. In the afternoon session, SHFE three-month copper contract prices narrowed earlier gains, down as low as RMB 72,280/mt. Finally, the copper for delivery in three months in the SHFE market closed at RMB 72,410/mt, up RMB 630/mt, or a gain of 0.88%. Positions for SHFE three-month copper contract prices were down 104 lots, while trading volumes were down 7,884 lots. Although SHFE three-month copper contract prices opened high and closed above the 60-day moving averages, trading volumes dropped slightly on the first trading day of SHFE lead futures market, a sign of cash movement and heavy resistance at the RMB 73,000/mt mark. SMM believes that SHFE copper prices will continue to fluctuate at the price mark in the near term.

In the spot market, spot discounts expanded to negative RMB 100/mt and RMB 50/mt after copper futures prices in the SHFE market gained nearly 1% to break RMB 72,000/mt on Thursday. Narrow fluctuations in the SHFE copper market helped keep spot discounts at the level. Traded prices for standard-quality copper were between RMB 72,150-72,250/mt, and RMB 72,200-72,350/mt for high-quality copper in the morning business. However, traded prices for standard-quality copper dropped to RMB 71,900-72,050/mt, and RMB 71,950-72,100/mt for high-quality copper in the afternoon business, as price rallies in the SHFE copper market narrowed. Cargo-holders represented unwillingness to move goods, along with optimistic outlook and large spot discounts on Thursday. Downstream producers stayed away from the market due to high prices, and only some of them purchased goods on an as-needed basis. Hence, the overall trading sentiment was moderate. 

SHFE 1105 aluminum contract prices opened slightly higher at RMB 16,730/mt on Thursday, and later climbed to an intraday high of RMB 16,770/mt briefly, but the Shanghai Stock Exchange composite index fluctuated weakly, causing SHFE 1105 aluminum contract prices to move below the daily moving average in the morning session, but with strong support found at RMB 16,700/mt. SHFE 1105 aluminum contract prices moved higher slightly in the afternoon session, and finally closed at RMB 16,755/mt, up RMB 60/mt compared with the previous trading day, or up 0.36%. SHFE 1105 aluminum contract prices closed with gains for five consecutive days, but the upward momentum was limited, with prices failing to touch the 20-day moving average and increasing slower than other base metals prices. The start of lead futures trading on the SHFE attracted some middlemen to shift speculative funds to lead markets, causing positions of SHFE 1105 aluminum contract and SHFE 1106 aluminum contract to fall by 6,372 lots, and SHFE 1106 aluminum contract will unlikely become the most actively traded contract in the short term. Weak spot aluminum market fundamentals continued to limit any increases in SHFE aluminum prices, and SMM predicts SHFE 1105 aluminum contract prices will test the resistance at RMB 16,800/mt on Friday.

Traded prices for spot aluminum were between RMB 16,640-16,560/mt in east China on Wednesday, with discounts of RMB 50-70/mt over SHFE current-month aluminum contract prices. SHFE aluminum prices retreated rapidly after opening slightly higher, causing spot aluminum prices to lack upward momentum. The start of lead futures trading created an additional investment opportunity for some middlemen, and downstream consumption remained weak, both keeping overall spot aluminum market sentiment sluggish. Although SHFE aluminum prices moved higher slightly in the afternoon session, spot aluminum prices failed to keep pace with SHFE aluminum prices, and bearish buying caused a portion of traders to move goods at RMB 16,530/mt for cash, but trading volumes were extremely limited, with the wait-and-see sentiment dominating spot aluminum markets.


On Thursday, SHFE 1106 zinc contract prices opened at RMB 18,710/mt boosted by the start of SHFE lead contract trading, then fluctuated between RMB 18,550-18,650/mt around the daily moving average, with prices finally closing at RMB 18,580/mt, up RMB 105/mt, or up 0.57%. SHFE 1106 zinc contract prices met pressure at RMB 18,800-19,000/mt. Trading volumes decreased by 15,000 lots to 388,622 lots, and total positions decreased by 11,192 lots to 212,670 lots. SHFE zinc prices rebounded, with long position momentum stronger.

SHFE zinc prices opened higher but moved lower, with spot discounts of RMB 550-600/mt. #0 zinc was traded between RMB 18,000-18,050/mt, with traded prices as much as RMB 18,100/mt in the morning session when SHFE zinc prices were at the high end. #1 zinc was traded between RMB 17,950-18,000/mt. Traded prices in Guangdong spot market were even higher than in Shanghai market. Spot discounts of #0 zinc were RMB 500/mt against SHFE 1106 zinc contract prices, with traded prices as much as RMB 18,100-18,200/mt, and # 1 zinc was traded between RMB 18,000-18,100/mt. Downstream buyers were cautious at higher zinc prices, while traders increased purchases given extending discounts, with transactions mainly made between traders.


The SHFE lead futures market formally opened on Thursday and reported strong gains. The SHFE lead 1109 contract surged to RMB 19,570/mt after opening at RMB 19,230/mt, up 6.6% from the benchmark price of RMB 18,350/mt. As a result, investors’ risk-aversion sentiment grew and sold out their positions at high prices, causing SHFE lead prices to fall. Meanwhile, LME lead prices slumped as well due to a rising US dollar index. In the afternoon, the SHFE lead 1109 contract kept fluctuating narrowly between RMB 18,850-19,075/mt, with longs and shorts struggling at around RMB 19,000/mt. Finally, the SHFE lead 1109 contract closed at RMB 18,930/mt, up RMB 585/mt, or a gain of 3.19%. Trading sentiment on Thursday, the first trading day, was active, with overall trading volumes for SHFE lead 1109 contracts of 73,440 lots, and positions were 9,696 lots.

In China’s domestic lead spot markets, well-known branded lead prices climbed to RMB 18,000/mt along with surging SHFE lead prices in the morning session, but fell to RMB 17,800-17,900/mt later due to declines in the SHFE lead market; unknown branded lead traded between RMB 17,650-17,750/mt. Some traders hoarding goods previously made profit-taking at high prices; some others closed positions when SHFE lead prices fell, and showed growing selling interest on spot lead. However, downstream producers responded mildly, and largely stood on the sideline amid high prices, and due to unclear movement of SHFE lead prices in the near future, keeping trading sentiment muted.


On Thursday in Shanghai tin markets, prices were up significantly, overall prices rose to or even above RMB 200,050/mt in the afternoon, except for some Jinxing tin traded between RMB 199,600-199,700/mt in the morning. Tin from Yunnan Tin Group, and some other minor branded tin traded between RMB 200,500-202,000/mt. In general, trading sentiment was quiet on Thursday, due to higher downstream wait-and-see sentiment amid rapidly rising tin prices.


LME nickel for delivery in three months opened at USD 26,350/mt and closed at USD 26,850/mt on March 23, up by USD 450/mt from a day earlier, with the highest price at USD 26,900/mt and the lowest price at USD 26,349/mt. LME nickel for delivery in three months fluctuated narrowly around the 60-day moving average after opening at USD 26,800/mt during the Asian trading hours on March 25, and surged at the tail of Asian trading hours from decline in the US dollar. As of 17:20, LME nickel prices reached the highest at USD 27,355/mt, with trading volumes of 816 lots. LME nickel inventories were down by 444 mt to 123,594 mt on March 24.

Jinchuan Group lifted ex-works nickel prices by RMB 3,000/mt to RMB 200,000/mt on March 24 boosted by LME nickel price surge on March 23. As LME nickel prices largely fluctuated weakly on March 24, spot transactions were relatively quiet, with deals largely done among traders. In the morning trading hours, traded prices of nickel from Jinchuan Group were around RMB 200,000/mt and traded prices of nickel from Russia were around RMB 199,000/mt. In the afternoon trading hours, prices slipped to certain extent, with prices of nickel from Russia slipping to RMB 198,500/mt and nickel from Jinchuan Group still in the RMB 199,700-200,000/mt range.


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