Metals News
SMM Daily Review - 2011/3/29 Base Metals Market
smm insight
Mar 30,2011

SHANGHAI, Mar. 30 (SMM) –

Depressed by falling LME copper prices, SHFE 1106 copper contract prices, the most active one, opened down RMB 970/mt at RMB 70,610/mt on Tuesday. SHFE three-month copper contract prices rallied after sliding to RMB 70,470/mt, but met resistance at the daily high level of RMB 71,300/mt.  In the afternoon session, SHFE 1106 copper contract prices were struggling at RMB 71,000/mt, with prices generally moving above the daily moving averages for the whole trading day. Finally, the copper for delivery in three months in the SHFE market closed at RMB 70,830/mt, down RMB 750/mt, or a loss of 1.05%. Positions for SHFE three-month copper contract prices were down 1,094 lots, while trading volumes were down 62,842 lots. Although SHFE copper prices showed a sign of rebound on Tuesday, prices were still unable to stabilize due to bearish market sentiment and downward momentum from technical indicators. However, the support at the RMB 70,000/mt mark will be solid.  

As SHFE copper market opened down nearly by RMB 1,000/mt, spot premiums increased, with offers between positive 100-180/mt in early business. Offers for standard-quality copper were quoted at later time, but with prices firm. Transactions were generally made between RMB 70,700-70,900/mt, and downstream producers were active in purchases at low prices. As copper prices in the SHFE market rallied at the tail of trading at the midday, spot premiums narrowed slightly to positive RMB 30-100/mt. Traded prices stood RMB 71,000/mt, reaching as high as RMB 71,100/mt, but transactions dropped from earlier business. As copper prices in the SHFE market opened low on Tuesday, smelters were not eager to move goods, since prices of standard-quality copper were below the monthly average prices despite of deals made at premiums. In this context, supply of high-quality copper was limited, and the price gap between high-quality and standard-quality copper was only around RMB 50/mt. In the afternoon session, SHFE copper prices experience fluctuations, and downstream buying interest turned quiet, but traders held offers at RMB 71,000/mt. Hence, traded prices moved around RMB 71,000/mt in the afternoon business, with narrower price fluctuating band. To sum up, the overall trading sentiment improved from a day earlier. Downstream producers were active in bargain hunting, and spot premiums remained, both helping support market sentiment.

On Tuesday, SHFE 1106 aluminum contract prices opened lower at RMB 16,780/mt tracking LME aluminum prices overnight, and then rebounded to fluctuate narrowly above the moving average. At the end of trading, SHFE 1106 aluminum contract prices touched RMB 16,850/mt, with prices closing at RMB 16,830/mt, down RMB 45/mt from the previous day, or down 0.27%. Total positions decreased by 3,218/mt to 285,354/mt, with prices fluctuating between the 10-day and 20-day moving averages. SHFE 1106 aluminum contract prices are expected to fall to test RMB 16,800/mt in the near term.

Spot aluminum prices in east China were between RMB 16,530-16,570/mt, with spot discounts of RMB 30-70/mt against SHFE spot-month aluminum contract prices. Spot aluminum contract prices continued to fall since SHFE aluminum prices opened significantly lower, and spot discounts narrowed since SHFE aluminum prices pared losses in the morning session. Transactions were mainly made at the low end, and traders were holding goods since they believe aluminum prices should rise, leaving the overall transaction quiet. SHFE aluminum prices continued to pare losses in the afternoon, boosting traders confidence, with mainstream traded prices between RMB 16,530-16,550/mt, but the overall transactions were still muted.

On Tuesday, SHFE 1106 zinc contract prices opened at RMB 18,150/mt and moved between RMB 18,200-18,300/mt in the morning session. In the midday, LME zinc prices rose to USD 2,350/mt, up from USD 2,330/mt, boosting SHFE 1106 zinc contract prices to touch RMB 18,415/mt. Since LME zinc prices fell at the end of trading, SHFE 1106 zinc contract prices lost previous gains to close at RMB 18,280/mt, down RMB 185/mt, or down 1%. Trading volumes decreased by 140,000 lots to 3100,080 lots, and total positions increased by 2,530 lots to 213,372 lots, with long position momentum stronger.

SHFE 1106 zinc contract prices opened low but moved higher fluctuating between RMB 18,150-18,250/mt in the morning session, with spot discounts of RMB 420-450/mt. #0 zinc was traded between RMB 17,800-17,850/mt. As SHFE 1106 zinc contract prices rose to RMB 18,300-18,400/mt in the midday, boosted by the rising LME zinc prices, spot discounts extended to RMB 480-500/mt. #0 zinc was traded around RMB 17,850/mt, with some brands traded as high as RMB 17,900/mt. #1 zinc was traded between RMB 17,750-17,800/mt. Downstream buyers purchased modestly at lower prices, but the overall transactions were weak. Spot discounts fell to RMB 450-480/mt in the afternoon when SHFE zinc prices slid, but transactions did not improve.

On Tuesday, SHFE lead 1109 contract prices opened lower at RMB 18,530/mt, but later rose to the intraday high of RMB 18,705/mt boosted by higher LME lead prices. SHFE lead 1109 contract prices moved narrowly between RMB 18,560-18,700/mt, finally closing at RMB 18,675/mt, down RMB 100/mt. Positions were 8,262 lots, down 294 lots, and trading volumes were 10,618 lots, down 6,342 lots, showing weaker trading sentiment.

Despite slight gains in SHFE lead prices in the morning session, traded prices in China’s lead spot markets were down on Wednesday’s morning, due to losses of USD 52/mt in overnight LME lead prices, relatively high domestic market supplies, as well as quiet transactions. Some transactions were made between RMB 17,400-17,500/mt in the morning. Environment protection inspections renewed due to discover of blood lead in residents of Taizhou, Zhejiang province, restricting downstream production further. In response, downstream producers lowered buying interest. Trading sentiment in domestic lead spot markets kept muted, and traders cut high-end lead prices in response, quoting offers between RMB 17,400-17,450/mt in response.

Dragged by price declines in overnight LME tin market, prices in Shanghai tin markets fell on Wednesday. Tin from Yunnan Tin Group and Jinhai branded tin traded between RMB 201,000-202,000/mt, and transactions for some minor branded tin were made between RMB 199,500-200,500/mt. Trading sentiment kept muted, and falling tin prices resulted in even stronger wait-and-see sentiment. However, major branded tin producers kept offers firm, and limited market supply is expected to support domestic tin spot prices to an extent.

LME nickel for delivery in three months opened at USD 27,050/mt and closed at USD 26,203/mt on March 28, down by USD 871/mt from a day earlier, with the highest price at USD 27,050/mt and the lowest price at USD 26,175/mt. LME nickel futures contract for delivery in three months rebounded slightly following brief slip after opening at USD 26,100/mt, and reached the highest at USD 26,350/mt during the Asian trading hours on March 29, but prices began to slip in the afternoon Asian trading hours and accelerated declines during the European trading hours. Market expectation over interest rate hike and renewed concern over Japan's nuclear crisis weighed on base metals prices, and market was waiting for the US economic data to be released tonight.

Jinchuan Group cut ex-works nickel prices by RMB 5,000/mt to RMB 195,000/mt on March 30, and spot prices slipped in response. Traded prices were mixed in the morning trading hours, but stabilized to certain extent in the afternoon trading hours. Overall trading sentiment was modest, and wait-and-see sentiment was still prevailing. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 194,500-195,000/mt range, and mainstream traded prices of nickel from Russia were in the RMB 193,500-194,000/mt range.

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