SMM Daily Review - 2011/6/24 Base Metals Market

SHANGHAI, Jun. 27 (SMM) --
Copper:
SHFE 1108 copper contract prices, the most active one, opened RMB 460/mt higher at RMB 67,460/mt on Friday, with prices moving higher after a high open. SHFE three-month copper contract prices advanced all the way after stabilizing at RMB 67,800/mt, as LME copper prices reached USD 9,100/mt and domestic stock markets closed more than 2% higher to 2,750 points. In the afternoon session, SHFE three-month copper contract prices climbed up to RMB 68,570/mt, but narrowed the gains after meeting resistance at the 60-day moving averages. Finally, SHFE 1108 copper contract prices closed at RMB 68,240/mt, up 860/mt or a gain of 1.28%. SHFE 1109 copper contract prices were up RMB 1,010/mt or 1.51%. Positions for SHFE 1108 copper contracts were down 8,450 lots and trading volumes were down 31,704 lots, while positions for SHFE 1109 copper contracts were up 8,388 lots and trading volumes were up 19,298 lots. The shift of the most actively-traded copper contracts would be completed in the upcoming week. The shorts left the market after making the stop-loss. Although the shorts withdrew the market temporarily, the upward room for SHFE copper prices would be restricted due to the weak technical indicator, with strong resistance at the 60-day moving averages.

In the spot market, copper premiums fell to positive RMB 100-250/mt, as SHFE copper prices moved higher after a high open and market supply was ample. Traded prices for standard-quality copper were between RMB 68,550-68,650/mt in the morning business, and RMB 68,600-68,700/mt for high-quality copper. Cargo-holders were active in moving goods for cash generation due to cash flow pressures and expectations of interest rate hikes, and domestic copper that were rarely seen recently also came into the market, while downstream producers made some purchases due to production needs at the weekend. In the afternoon session, spot copper premiums fell further due to continuous increases in SHFE copper prices, and offers for imported standard-quality copper turned to discounts of negative RMB 50/mt. However, traded prices rose to RMB 68,800-68,900/mt, with relatively low trading transactions at the high prices. Copper inventories monitored by Shanghai Future Exchange (SHFE) decreased 6,518 mt to 80,792 mt in the week ending June 24th, flat with the number of cancelled warrants within the week, suggesting that traders made fast and short-term transaction and downstream producers made purchases at low prices during price fluctuation period.

Aluminum:
SHFE aluminum prices rallied for two consecutive days. SHFE 1108 aluminum contract prices climbed to as high as RMB 17,070/mt following other base metals prices after opening lower at RMB 17,000/mt on Friday, with prices finally closing at RMB 17,055/mt, up RMB 40/mt compared with the previous trading day. Positions for SHFE 1108 aluminum contract fell by 1,566 lots to 69,636 lots, while positions for SHFE 1109 aluminum contract increased by 1,630 lots, with SHFE 1109 aluminum contact expected to become the most actively traded contract in the coming week. SHFE 1108 aluminum contract prices stabilized at the 10-day moving average, with strong support found at RMB 17,000/mt. SMM predicts SHFE aluminum prices will likely rise in the near term given tighter supply and higher costs.      

Mainstream traded prices for spot aluminum were between RMB 17,130-17,150/mt in east China, with premiums of positive RMB 40-60/mt over SHFE current-month aluminum contract prices. Traded prices for low-iron aluminum were between RMB 17,170-17,190/mt, and spot traded prices in Wuxi were between RMB 17,120-17,150/mt. SHFE 1108 aluminum contract prices opened lower but moved higher boosted by other base metals prices, and cargo-holder unwillingness to move goods helped push up spot aluminum prices gradually. Cargo-holders kept offers firm, and middlemen made transactions actively, but downstream buying interest remained low, keeping spot transactions muted.  

Lead:
Last Friday, SHFE lead price jumped to RMB 17,000/mt after opening higher at RMB 16,875/mt, but then fell back to RMB 16,900-16,980/mt. Boosted by rising LME lead prices, SHFE lead prices drifted higher in the afternoon and rose to hit RMB 17,045/mt, with prices stabilizing above the 30-day moving average and finally closing at RMB 17,030/mt, up RMB 175/mt, or a gain of 1.04%. Trading volumes were 4,180 lots, up 820 lots; positions were only slightly up by 6 lots to 8,816 lots.

In China’s domestic lead spot markets, the highest offers for well-known branded lead were at about RMB 16,250/mt, but most transactions were made at RMB 16,100-16,220/mt in the morning due to limited high-priced transactions. Lead from Gejiu, Yunnan province was quoted at RMB 16,100/mt, with spot discounts expanding to RMB 750-800/mt. In the afternoon, SHFE lead prices kept fluctuating at high levels and rose above RMB 17,000/mt, making domestic lead spot prices to rise to RMB 16,250/mt. With market concerns about PBOC’s possible counter-inflation measures prior to the weekend, traders were cautious. Generally, overall transactions were quiet last Friday.

Zinc:
Last Friday, SHFE 1109 zinc contract prices opened slightly higher at RMB 17,320/mt, with prices mostly moving between RMB 17,300-17,400/mt in the morning session. In the midday, SHFE 1109 zinc contract prices fell to RMB 17,295/mt then rallied. Boosted by the Shanghai Stock Exchange composite index, SHFE 1109 zinc contract prices rose further in the afternoon to RMB 17,400/mt, with prices finally closing at RMB 17,455/mt, up RMB 190/mt, or up 1.1%. Trading volumes decreased by nearly 50,000 lots to 265,886 lots, and total positions increased by 1,810 lots to 195,894 lots.

SHFE 1108 zinc contract prices moved narrowly between RMB 17,200-17,300/mt. #0 zinc was traded between RMB 17,100-17,150/mt, with discounts of RMB 150-180/mt against SHFE 1108 zinc contract prices. #1 zinc was traded around RMB 17,100/mt.Downstream buyers were cautious, while some traders purchased modestly, leaving transactions quiet. Offers of spot goods were between RMB 17,180-17,200/mt in the afternoon, but buying interest was low. Imported zinc prices were still low, with offers of #0 zinc RMB 50-60/mt lower than domestic #0 zinc, but transactions were still lackluster.

Tin:
In Shanghai tin markets, prices largely kept stable last Friday, with prices in some regions slightly down. Traded prices for Yunxiang, Nanshan brands and tin from Hunan province were RMB 191,000-191,500/mt. Some transactions for tin from Yunnan Tin Group were made between RMB 192,000-193,500/mt. Transactions remained muted, with downstream producers purchasing only on an as-needed basis. Despite signals of stabilizing LME tin prices, domestic consumption did not improve as downstream producers entered the low-demand period. Hence, domestic tin spot prices lacked upward momentum.

Nickel:
LME nickel for delivery in three months opened at USD 22,300/mt and closed at USD 22,125/mt last Thursday, down by USD 283/mt from a day earlier, with the highest price at USD 22,300/mt and the lowest price at USD 21,730/mt. LME nickel futures contract for delivery in three months fluctuated wider to hit a high of USD 22,250/mt and touched a low of USD 21,950/mt during the Asian trading hours last Friday. Market sentiment improved to certain extent due to progress in the Greece’s aid plan and since release of crude oil inventory will stimulate economic growth. LME nickel inventories were up by 258 mt to 109,872 mt.

In the Shanghai nickel spot market, affected by Thursday’s LME nickel price losses, transactions were relatively sluggish in the morning trading hours. Mainstream traded prices of nickel from Russia were around RMB 162,500/mt, and mainstream traded prices of nickel from Russia were around RMB 165,000/mt. In the afternoon trading hours, spot prices rallied along with LME nickel price increase. Traded prices of nickel from Russia were around RMB 163,000/mt, and mainstream traded prices of nickel from Jinchuan Group were around RMB 165,500/mt. Generally speaking, trading sentiment was quiet, and transactions were largely done among traders.

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