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SMM Daily Review - 2011/7/1 Base Metals Market
Jul 4,2011 09:48CST
data analysis

SHANGHAI, Jul. 4 (SMM) --


SHFE 1109 copper contract prices, the most active one, opened up RMB 320/mt at RMB 69,700/mt on Friday, with prices moving higher during the whole trading day. SHFE three-month copper contract prices were pushed up to a high level of RMB 69,870/mt reached on Thursday, as the shorts left the market after a high open in the morning session, but then fell back to fluctuate narrowly around RMB 69,600/mt. In the afternoon session, SHFE three-month copper contract prices tried to reach RMB 70,000/mt following rising LME copper prices due to a drop in the US dollar index, climbing as high as RMB 70,040/mt. At the tail of trading, SHFE three-month copper contract prices narrowed previous gains due to large-scale position closings. Finally, SHFE 1109 copper contract prices closed at RMB 69,880/mt, up RMB 500/mt or 0.72%. Positions for SHFE 1109 copper contracts were up 3,422 lots, while trading volumes were down 61,018 lots. The buying interest of the longs increased during the whole trading day, but the resistance at RMB 70,000/mt was still strong. Hence, SHFE three-month copper contract prices were expected to fluctuate continuously around RMB 70,000/mt.      

In the spot market, today was the first trading day in July, and SHFE copper prices continued to move higher after a high open. Some traders were forced to reduce sales due to hedging. The SHFE/LME copper price ratio fell, dampening imported copper cargo-holder’s interest in moving goods, and reducing market supply as a result. In this context, spot copper discounts narrowed the declines compared to Thursday, to discounts of negative RMB 250-120/mt. Traded prices for standard-quality copper were between RMB 69,700-69,800/mt, and between RMB 69,750-69,950/mt for high-quality copper. Friday was the first trading day after the change of month, and cash flow pressures were still available, causing downstream consumers to be more cautious towards RMB 70,000/mt. However, some traders were still interested in buying given the large discounts, and speculative activities improved compared to the previous two trading days. SHFE copper prices continued to climb above RMB 70,000/mt in the afternoon session, and cargo-holders were positive towards premiums in the upcoming week, leading spot copper supply to decrease sharply. In response, spot copper discounts fell further to negative RMB 120-100/mt. Traded prices were above RMB 70,000/mt, with prices between RMB 70,000-70,100/mt. SHFE announced copper inventories increased 9,297 mt to 90,089 mt in the week ending July 1st, suggesting low consumption due to cash flow pressures at the month-end and also signaling ample imported copper supply. With the release of cash flow pressures in next week, spot copper discounts were expected to change.  


SHFE 1109 aluminum contract prices, the most actively-traded one, opened at RMB 17,145/mt on Friday. In the morning session, SHFE 1109 aluminum contract prices showed mild movements, with prices struggling at around the daily moving averages. In the afternoon session, SHFE three-month aluminum contract prices stood above RMB 17,200/mt, and climbed above RMB 17,400/mt during the last trading hour, as positions were up by more than 25,000 lots along with inflow of a large sum of cash, with the largest gain nearly 1.5%. At the tail of the trading, price rallies in the SHFE aluminum market narrowed due to stop-loss trading by shorts and profit-taking. Finally, SHFE three-month aluminum prices closed at RMB 17,265/mt, up RMB 125/mt, or a gain of 0.73%. During the first trading day of July, SHFE aluminum market was well supported by cash liquidity, and trading volumes for the most actively-traded aluminum contract in the SHFE market tripled. The balanced shorts and longs are expected to help SHFE aluminum prices find a solid support at RMB 17,300/mt. According to the latest data, SHFE aluminum inventories were down 15,878 mt to 254,617 mt, the lowest level since October 2009. The continuing declines in stocks will also support aluminum prices in the coming week.

In the Shanghai spot aluminum market, mainstream traded prices were between RMB 17,240-17,260/mt, and premiums over SHFE current-month aluminum contract prices were positive RMB 10-20/mt. When SHFE current-month aluminum contract prices strongly rose to RMB 17,200/mt in the morning session, spot premiums narrowed slightly initially, but then rallied as the improved consumption helped support aluminum prices. Traders made limited sales due to low stocks, resulting in supply unavailability. In the afternoon business, spot aluminum prices climbed to RMB 17,400/mt, as SHFE current-month aluminum prices soared due to support from cash liquidity. High prices depressed market transactions.


Last Friday, SHFE lead prices opened higher at RMB 17,140/mt, and then moved around RMB 17,150/mt due to inadequate upward momentum. In the afternoon, SHFE lead prices climbed to RMB 17,235/mt boosted by rising LME lead prices, but dropped slightly at end of trading, with prices finally closing at RMB 17,160/mt, down RMB 40/mt. Trading volumes were 2,112 lots, down 738 lots; positions were 9,364 lots, up 444 lots.

In China’s domestic lead spot markets, traded prices for well-known branded lead such as Nanfang and Chengyuan etc. were RMB 16,400-16,430/mt, with spot discounts between negative RMB 750-800/mt. Silver-contained lead was quoted between RMB 16,250-16,300/mt. In the afternoon, traded prices for well-known branded lead in Shanghai rose to RMB 16,450/mt due to rising SHFE lead prices, with transactions at Jiyuan Jinli Smelters Company and Jiyuan Wanyang Smeltery Group made at around RMB 16,250/mt. Downstream producers were still in the process of production suspension, with inquiries limited. Traders remained cautious, keeping transactions muted.


Last Friday, SHFE 1109 zinc contract prices surged to RMB 17,885/mt in the morning session, then fell to RMB 17,750-17,800/mt, mostly fluctuating around the moving average during the day. Finally, SHFE 1109 zinc contract prices closed at RMB 17,810/mt, up RMB 130/mt, or up 0.74%. A large number of longs closed positions with profit-taking. Trading volumes decreased by over 50,000 lots to 244,920 lots, and total positions decreased by 1,900 lots to 208,182 lots.

SHFE 1109 zinc contract prices rose in the morning session then fell to RMB 17,750/mt. #0 zinc was traded between RMB 17,400-17,350/mt, with traded prices of #1 zinc between RMB 17,350-17,400/mt. Transactions improved compared to Thursday but were still quiet. Spot discounts expanded to negative RMB 380-400/mt, with discounts of RMB 160-170/mt against SHFE spot-month zinc contract prices. Transactions were muted except for registered brands, with speculators active.


In Shanghai tin spot markets, prices stopped falling and moved slightly up last Friday, due to rising LME tin prices, with mainstream prices rebounding above RMB 190,000/mt. Traded prices for tin from Hunan province, Kaiyuan and Jinxing brands were RMB 190,500-191,000/mt, while tin from Yunnan Tin Group were RMB 192,000-192,500/mt. Constantly rising LME tin prices boosted domestic consumption, and resulted in reduced market supply, supporting spot prices in response. Some market players with wait-and-see sentiment were still purchasing on an as-needed basis, while others with pessimistic market outlook were purchasing cautiously.


LME nickel for delivery in three months opened at USD 23,020/mt and closed at USD 23,480/mt on Thursday, up by USD 405/mt from a day earlier, with the highest price at USD 23,610/mt and the lowest price at USD 22,950/mt. LME nickel futures contract for delivery in three months fluctuated narrowly after opening at USD 23,300/mt during the Asian trading hours last Friday, touching the lowest at USD 23,180/mt. LME nickel prices finally closed with gains after rallying for five consecutive days. LME nickel inventories were down by 312 mt to 106,836 mt.

Jinchuan Group lifted ex-works nickel prices by RMB 3,000/mt to RMB 168,000/mt last Friday, which boosted spot market to great extent, with mainstream traded price advancing to RMB 168,000/mt. Meanwhile, trading sentiment in the Shanghai nickel spot market improved to great extent. Some market participants turned optimistic towards spot nickel price outlook amid significant rally of LME nickel prices. Therefore, traders took the opportunity to replenish stock when nickel prices were acceptable. In addition, some downstream consumers also entered market to make purchases. Buying sentiment offered incentive to spot market, with brisk trading sentiment reported. Mainstream traded prices of nickel from Russia were in the RMB 167,500-168,000/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 168,500-169,300/mt range.

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