SMM Daily Review - 2011/3/25 Base Metals Market

SHANGHAI, Mar. 28 (SMM) –

Copper
SHFE 1106 copper contract prices, the most active one, opened down RMB 100/mt at RMB 72,530/mt on Monday, and rose to a daily high level of RMB 72,860/mt after opening. During the second trade session in the morning, SHFE three-month copper contract prices dropped with LME copper prices, and moved narrowly around RMB 72,500/mt. In the afternoon session, SHFE three-month copper contract prices fell further, down as low as RMB 72,270/mt after dropping below RMB 72,300/mt. Finally, the copper for delivery in three months in the SHFE market closed at RMB 72,360/mt, down RMB 270/mt, or a loss of 0.37%. Positions for SHFE three-month copper contract prices were down 242 lots, while trading volumes were up 1,166 lots. Technically, SHFE 1106 copper contract prices fluctuated narrowly in the 30-60 day moving averages, with sound support, but the resistance at the RMB 73,000/mt mark remained. The low-end of SHFE three-month copper contract prices is moving higher, and the fluctuating band will be narrowing. 

In the spot market, spot offers were little changed from a day earlier as SHFE copper market opened slightly lower, with discounts between negative RMB 100-50/mt. As copper prices in the SHFE market dived after 10:30 am, spot discounts gradually narrowed. Before the end of trading in the morning, high-quality copper was offered at premiums of positive RMB 50/mt, and standard-quality copper was quoted at discounts of RMB 0/mt. 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. Copper prices in the SHFE market fell further, but cargo-holders failed to lift spot offers further due to weak consumption. High-quality copper was offered at premiums of positive RMB 30/mt, and offers of standard-quality copper were little changed from morning levels. Traded prices for standard-quality copper were between RMB 72,050-72,150/mt, and RMB 72,100-72,250/mt for high-quality copper. Downstream producers continued to purchase on an as-needed basis, and speculators were eager to purchase goods in the morning when spot offers were at discounts. Hence, transactions rose at first, and then dropped. According to the data tallied by Shanghai Futures Exchange (SHFE), copper inventories were down 5,143 mt in the week ending March 25th, an indication that inventories were on the decrease, and market consumption improved from the previous level.

Aluminum
SHFE 1105 aluminum contract prices opened flat at RMB 16,740/mt on Friday, with prices fluctuating higher to test the resistance at RMB 16,800/mt. In the afternoon session, LME aluminum prices rebounded, helping SHFE 1105 aluminum contract prices stand above the RMB 16,800/mt mark and even touch an intraday high of RMB 16,810/mt during the last three minutes of trading hours on Friday. Finally, SHFE 1105 aluminum contract prices closed at RMB 16,800/mt, up RMB 60/mt compared with the previous trading day, or up 0.36%. SHFE aluminum was the only metal that made gains on Friday, and SHFE 1105 aluminum contract prices closed with gains for five consecutive days and stood steady above the 20-day moving average. Domestic spot aluminum inventories have fallen slightly for two consecutive weeks, and downstream consumption showed signs of improving, helping boost investor confidence. Meanwhile, LME aluminum prices will remain bullish in the short term, and SMM predicts SHFE 1105 aluminum contract prices will rise further to test the resistance at RMB 16,900/mt. The latest data shows SHFE aluminum inventories fell by 151 mt to 411,438 mt.

Traded prices for spot aluminum were between RMB 16,600-16,640/mt in east China on Friday, with discounts of RMB 50-80/mt over SHFE current-month aluminum contract prices. SHFE aluminum prices have risen for one week, helping push up spot aluminum prices. Since financial settlement at the month-end and weak consumption significantly dampened willingness of traders to move goods, most deals were made at the low-end of traded prices despite that actual traded prices climbed continuously, and overall trading volumes were limited. Most traders were reluctant to move goods in the afternoon session on Friday due to capital problems, and only a small potion of low-end brand goods at RMB 16,590/mt were found in the market, but mainstream traded prices remained at RMB 16,600/mt, with overall trading sentiment sluggish. 

Lead
Last Friday, the SHFE lead futures prices rose rapidly to RMB 19,135/mt after a slightly higher opening, but failed to hold on this level and fell to below daily moving averages later, fluctuating narrowly at around RMB 19,000/mt in the afternoon, showing longs and shorts still struggling at this level. Finally, the SHFE lead futures market closed the day at RMB 18,950/mt, slightly up RMB 15/mt, or a gain of 0.08%. Trading volumes were 24,858 lots, sharply down by 48,582 lots from a day earlier, indicating faded trading sentiment.

In China’s domestic lead spot markets, market players showed strong wait-and-see sentiment in the morning of last Friday due to declining SHFE lead futures prices, and transactions were limited. But cargo-holders kept offers firm, with well-known branded lead traded between RMB 17,700-17,800/mt. Transactions were mainly made among traders, while downstream producers continued to stay out of the market. In the afternoon, some cargo-holders increased selling interest in view of even lower SHFE lead prices, and cut offers in response, making well-known branded lead offers to between RMB 17,650-17,750/mt, and lead from Gejiu, Yunnan province between RMB 17,650/mt. Meanwhile, downstream producers entered the market for bargain-hunting, helping improve transactions in the afternoon.

Zinc
Last Friday, SHFE 1106 zinc contract prices opened higher at RMB 18,635/mt and then fell after touching RMB 18,705/mt in the morning session, with prices plunging to RMB 18,480/mt later. Boosted by the stronger Shanghai Stock Exchange composite index and LME zinc prices, SHFE 1106 zinc contract prices rallied to closed at RMB 18,605/mt, down RMB 25/mt, or down 0.13%. Trading volumes decreased by 60,688 lots to 327,934 lots, and total positions decreased by 2,400 lots to 210,270 lots. A large number of investors left the market to buy SHFE lead contracts.

SHFE 1106 zinc contract prices fluctuated between RMB 18,500-18,600/mt in the morning trading. Spot discounts of #0 zinc were around RMB 550/mt, which was traded at RMB 18,050/mt. Spot discounts narrowed to RMB 500-530/mt since SHFE zinc prices fell to RMB 18,500/mt, with #0 zinc traded at RMB 18,000/mt or as low as RMB 18,000/mt. Hedging investors were aggressively moving goods as spot discounts narrowed, causing transactions to improve in the afternoon.

Tin
Last Friday in Shanghai tin markets, traded prices were basically flat from a day earlier. Traded prices for tin from Yunnan Tin Group, and some minor branded tin were RMB 200,500-202,000/mt; some transactions for minor branded tin were even made at RMB 200,000/mt. In general, trading sentiment was moderate, and smelters kept offers firm, with strong wait-and-see sentiment in the market.

Nickel
LME nickel for delivery in three months opened at USD 26,800/mt and closed at USD 26,940/mt on March 24, up by USD 90/mt from a day earlier, with the highest price at USD 27,355/mt and the lowest price at USD 26,650/mt. LME nickel futures contract for delivery in three months fluctuated widely around 60-day moving average after opening at USD 26,910/mt during the Asian trading hours on March 25, reaching the highest at USD 27,100/mt and touching the lowest at USD 26,800/mt. The EU summit will continue on Friday night, and market expected that Portugal will seek for emergency aid for debt restructuring, which will weigh on base metal prices to certain extent. LME nickel inventories were up by 660 mt to 124,254 mt.

Traded prices in the Shanghai nickel spot market declined to certain extent on March 25. Traded prices of nickel from Jinchuan Group were in the RMB 199,500-200,000/mt range, and traded prices of nickel from Russia were in the RMB 198,500-199,000/mt range. Few downstream consumers entered market, and deals were largely done among traders. Transactions were boosted by LME nickel prices surge in the morning trading hours, but weakened in the afternoon trading hours when LME nickel prices slipped.

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