SMM Daily Review - 2011/6/30 Base Metals Market

SHANGHAI, Jul. 1 (SMM) --
Copper:
SHFE 1109 copper contract prices, the most active one, opened up RMB 1,090/mt at RMB 69,020/mt on Thursday, as LME copper prices overnight rose significantly. SHFE three-month copper contract prices followed LME copper prices to move higher after a high open during the whole trading day, up as high as RMB 69,890/mt. Finally, the most actively-traded copper contract prices closed at RMB 68,860/mt, up RMB 1,930/mt or a gain of 2.84%. Positions for SHFE 1109 copper contracts were up 11,224 lots, while trading volumes were up 56,066 lots. Recently, SHFE three-month copper contract prices stood directly at the 60-day moving average after a high open. The rate of turnover increased, along with the buying interest growing strong.

In the spot market, copper discounts increased to negative RMB 400-250/mt after SHFE copper prices opened 2% higher. Traded prices for standard-quality copper were between RMB 69,350-69,400/mt, and RMB 69,400-69,500/mt for high-quality copper. Most of enterprises were facing cash flow problems since today was the last trading day of June. Despite the increasing copper discounts, speculators could only stand on the sidelines due to heavy cash flows, resulting in sluggish transactions. In the afternoon session, traders were optimistic towards copper premiums on Friday after the change of month, so some traders who had money chose to enter into the market to make purchases. Discounts for high-quality copper were stable at negative RMB 300/mt. Traded prices were pushed up to RMB 69,450-69,700/mt, and trading sentiment improved slightly.     

Aluminum:
SHFE 1109 aluminum contract became the most actively traded contract on Thursday, with the most actively traded contract opening slightly higher at RMB 17,115/mt. Later, SHFE 1109 aluminum contract prices rallied to test RMB 17,200/mt supported by long speculative funds, with trading volumes increasing to over 20,000 lots and positions growing by 3,180 lots to 67,164 lots. Finally, the most actively traded contract closed at an intraday high of RMB 17,180/mt, up RMB 100/mt or 0.59% compared the previous trading day. SHFE 1109 aluminum contract prices climbed strongly due to gaining long position momentum, and upward momentum will help support SHFE 1109 aluminum contract prices to struggle at RMB 17,200/mt despite that prices face resistance at this level.

Mainstream traded prices for spot aluminum were between RMB 17,220-17,250/mt in east China, with premiums of positive RMB 20-50/mt over SHFE current-month aluminum contract prices. SHFE current-month aluminum contract prices climbed strongly to struggle at RMB 17,200/mt in the morning. Spot aluminum prices remained firm with slight premiums over SHFE current-month aluminum contract prices on the last trading day in June, and few buying caused market transactions to be extremely limited. SHFE current-month aluminum contract prices advanced steadily to RMB 17,305/mt in the afternoon, and almost no transactions were made in spot aluminum markets.

Lead:
On Thursday, SHFE lead prices stabilized at RMB 17,000/mt after opening higher at RMB 17,100/mt, and rose to RMB 17,100/mt again after 11:00 boosted by rising equity prices. In the afternoon, SHFE lead prices continued to drifted higher and climbed to RMB 17,210/mt, finally closing at RMB 17,200/mt, up RMB 260/mt, or a gain of 1.33%. Trading volumes were 2,850 lots, up 810 lots; positions were 8,920 lots, up 492 lots.

In China’s domestic lead spot markets, prices rose by near RMB 150/mt boosted by rising SHFE lead prices. Offers for well-known branded lead were RMB 16,350-16,400/mt, while offers for lead from Gejiu, Yunnan province were RMB 16,200-16,250/mt, with spot discounts between negative RMB 850-900/mt. In the afternoon, domestic lead spot prices were little changed due to stable SHFE lead prices, and traders with bullish sentiment restricted sales, keeping transactions weak.

Zinc:
On Thursday, SHFE 1109 zinc contract prices opened higher at RMB 17,600/mt tracking LME zinc prices overnight, then surged to RMB 17,700/mt following the rising Shanghai Stock Exchange composite index. Finally, SHFE 1109 zinc contract prices closed at RMB 17,760/mt, above the 60-day moving average, up RMB 320/mt, or up 1.83%. Trading volumes increased by 80,000 lots to 291,888 lots, and total positions increased by 15,180 lots to 210,082 lots.

SHFE 1109 zinc contract prices opened higher and edged up in the morning session, and spot zinc prices rose in response. #0 zinc was traded around RMB 17,300/mt, with discounts of RMB 300/mt against SHFE 1109 zinc contract prices. Spot discounts extended to RMB 350/mt along with rising SHFE zinc prices, with offers of #0 zinc between RMB 17,360-17,380/mt. But traders were purchasing modestly due to tight cash flow, and downstream buying interest was low, leaving the overall transaction quiet. Spot discounts expanded to RMB 400/mt in the afternoon as SHFE zinc prices rose further, with spot offers around RMB 17,400/mt. But transactions were muted.

Tin:
In Shanghai tin spot markets, continuously weak consumption failed to boost prices, with most traders keeping offers unchanged, but Tianti and Yunheng branded tin were quoted at RMB 193,000/mt boosted by rising LME copper prices and equities. Downstream consumption began to rise and traders’ goods were drained. Mainstream traded prices for tin from Yunnan Tin Group were RMB 190,000-192,000/mt, and Nanshan and Kaiyuan branded tin traded at RMB 189,500-190,000/mt. In the afternoon, tin from Hunan province was quoted at RMB 190,500/mt, but with transactions limited, showing cautious sentiment in the market.

Nickel:
LME nickel prices advanced all the way to USD 23,175/mt after opening at USD 22,700/mt on Wednesday, and finally closed at USD 23,075/mt, up by USD 425/mt from a day earlier. Due to positive expectation over Greek aid package, base metal pries received support and rebounded back, with prices largely fluctuating above 30-day moving average. The US dollar was still weak during Thursday’s Asian trading hours. LME nickel prices fall slightly to test USD 22,950/mt after opening at USD 23,020/mt. It was reported that Minara, the second largest nickel ore operator in Australia, cut production due to equipment failure, with specific impact on market unknown. Following the news, LME nickel prices advanced further to USD 23,400/mt. LME nickel inventories were down by 648 mt to 107,148 mt.                 

In the Shanghai nickel spot market, offers increased, but transactions were not brisk in the morning trading hours. However, arbitrage transactions increased, with the expanding spread between Wuxi Electronic Exchange futures nickel prices and spot nickel prices when Wuxi Electronic Exchange futures nickel prices advanced. Mainstream traded prices of nickel from Russia were in the RMB 165,500-166,000/mt range and mainstream traded prices of nickel from Jinchuan Group were in the RMB 166,500-167,500/mt range. Transactions and trading sentiment didn't improve to great extent at the month-end.  

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