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SMM Daily Review – 2011/7/21 Base Metals Market
Jul 22,2011 09:38CST
smm insight
SHFE 1109 copper contract prices opened down RMB 260/mt at RMB 72,360/mt on Thursday, with prices falling due to resistance during the whole trading day.

SHANGHAI, Jul. 22 (SMM)--

SHFE 1109 copper contract prices opened down RMB 260/mt at RMB 72,360/mt on Thursday, with prices falling due to resistance during the whole trading day. SHFE three-month copper contract prices were pushed up to RMB 72,500/mt by the longs after opening lower in the morning business, reaching to RMB 72,670/mt briefly. Later, HSBC announced the preliminary manufacturing PMI data fell below 50 in July, dampening investment confidence and causing LME copper prices to fall twice. While the Shanghai Composite Index continued to make corrections, SHFE three-month copper contract prices dropped further and lost RMB 72,000/mt at the tail of trading, with a low level at RMB 71,930/mt. Finally, SHFE 1109 copper contract prices closed at RMB 72,000/mt, down RMB 610/mt or a loss of 0.84%. Similar to price movements in SHFE 1109 copper contracts, SHFE 1110 copper contract prices reached to a high level of RMB 72,970/mt, and closed at RMB 72,150/mt at the tail of trading, down RMB 680/mt. Positions for SHFE 1109 copper contracts were down 12,094 lots and trading volumes were down 18,530 lots, while positions and trading volumes for SHFE 1110 copper contracts were up 13,780 lots and 6,768 lots, respectively, completing the shift of the most actively-traded copper contracts. SHFE three-month copper contract prices would test RMB 72,000/mt due to strong sell-off pressures during the whole trading day and the low-end support retreating to the 10-day moving average.    

In the spot market, copper discounts gradually reduced to negative RMB 300-200/mt from negative RMB 380-300/mt, as SHFE copper prices fell by nearly RMB 400/mt due to resistance in the morning business. Traded prices for standard-quality copper were between RMB 71,700-71,900/mt during the trading day, and RMB 71,800-72,100/mt for high-quality copper, with strong wait-and-see sentiment in the market. Cargo-holders showed unwillingness to sell at low prices after SHFE copper prices lost RMB 72,000/mt during trading hours, while downstream producers continued to stand on the sidelines, resulting in weak transactions. Copper prices in the SHFE market continued to move lower in the afternoon session, but copper discounts failed to fall further due to weakening consumption. Offers for high-quality copper were still quoted around discounts of negative RMB 200/mt. Fewer market participants entered into the market, and traders who were recent main contributors of market transactions also slowed their pace of purchasing due to cautious mood. 

Most active SHFE 1110 aluminum contract prices opened lower at RMB 17,630/mt on July 21st and fell below the 5-day moving average later. At the tail of trading, SHFE 1110 aluminum contract prices further plunged and hit RMB 17,480/mt. Finally SHFE 1110 aluminum contract prices slightly rebounded and closed at RMB 17,505/mt, down RMB 135/mt or 0.77% from previous trading day. Total positions of most active SHFE 1110 aluminum contracts increased by 4,320 lots to 115,538 lots. Though SHFE aluminum prices opened lower and kept falling, the downward space will be limited due to tight spot aluminum supply. Therefore, SMM expects most active SHFE 1110 aluminum contract prices to test RMB 17,500/mt in the short term.

Mainstream traded prices of spot aluminum in Shanghai on July 21st were between RMB 17,770-17,800/mt, with premiums of positive RMB 70-100/mt over SHFE current-month aluminum prices. In the morning, though SHFE aluminum prices fell, spot aluminum prices kept rising and hit RMB 17,800/mt supported by tight supply. Purchases were reported at small volumes among middlemen, but were rarely seen among downstream buyers. Market transactions were limited despite active inquiries. In the afternoon, as SHFE current-month aluminum prices continued to fall, spot aluminum prices fell to near RMB 17,760/mt in response. Market transactions were rarely reported due to scarce supply.

On Thursday, SHFE 1110 zinc contract prices opened lower at RMB 18,700/mt, with prices moving between RMB 18,650-18,700/mt during the morning session. China’s HSBC PMI in June was lower than forecasts, and the Shanghai Stock Exchange composite index plummeted, both dragging down SHFE 1110 zinc contract prices to RMB 18,500-18,600/mt, with prices finally closing at RMB 18,560/mt, down RMB 210/mt, or down 1.12%, below the 5-day moving average. Trading volumes increased by 12,390 lots to 204,006 lots, and total positions increased by 5,300 lots to 196,986 lots.

SHFE 1110 zinc contract prices opened lower and plunged at noon due to weak China HSBC PMI in June. #0 zinc was traded between RMB 18,280-18,300/mt in the morning, then fell to RMB 18,150-18,200/mt along with SHFE zinc prices, with discounts of negative RMB 370-400/mt against SHFE 1110 zinc contract prices. #1 zinc was traded between RMB 18,100-18,150/mt. Traders were actively moving goods while downstream buyers were cautious. In the afternoon, spot zinc prices fell to RMB 18,150/mt tracking SHFE zinc prices, and downstream buyers purchased modestly. But the overall transactions were quiet.

On Thursday, SHFE lead prices moved around daily moving averages after opening lower at RMB 17,600/mt, and fell to RMB 17,470/mt after 10:30 following dipping LME lead prices. In the afternoon, SHFE lead prices kept stable between RMB 17,480-17,530/mt boosted by buying activities at low prices. Finally, SHFE lead prices slumped at tail of trading, and closed at RMB 17,445/mt, down RMB 224/mt or 1.36%. Positions were 9,020 lots, down 130 lots; trading volumes were 1,848 lots, down 44 lots, indicating investors’ cautious sentiment in view of the slight falls in SHFE tin prices.

In China’s domestic lead spot markets, spot discounts kept between negative RMB 400-500/mt on Thursday despite falling SHFE lead prices, and spot prices fell by RMB 100/mt after 10:30. Offers from Nanfang and Chihong were at first around RMB 17,200/mt, and then fell to around RMB 17,100/mt; offers for other brands such as Shuangyan and Jinguan dropped from RMB 17,080-17,150/mt, to RMB 17,000-17,050/mt. In the afternoon, quotations in the spot market moved lower, with offers at RMB 17,020/mt for well-known branded lead and even below RMB 17,000/mt for Baiyin brand. Lead spot prices were struggling around the RMB 17,000/mt mark, with overall trading sentiment muted.

In Shanghai tin spot markets, prices moved up on Thursday following rising LME tin prices overnight, and traded prices climbed to RMB 203,200-204,500/mt. Tin from Yunnan Tin Group, Yunheng and Yunxiang brands traded at RMB 204,000-204,500/mt, while Nanshan brand and other brands from Guangdong traded at RMB 203,200-203,500/mt. The overall transactions remained quiet, due to depressed downstream buying interest from constantly falling prices. LME tin prices met resistance at USD 28,000/mt, and are expected to experience corrections around this level. In this context, domestic tin spot price growth should also be restricted, with prices possibly keeping fluctuating at high levels over the near term with weak consumption.

LME nickel for delivery in three months opened at USD 24,050/mt and closed at USD 24,000/mt on Wednesday, down by USD 105/mt from a day earlier, with the highest price at USD 24,185/mt and the lowest price at USD 23,780/mt. LME nickel prices advanced slightly to USD 24,130/mt after opening at USD 24,050/mt during the Asian trading hours on Thursday, but fell all the way later to move below USD 24,000/mt and hit a low of USD 23,731/mt. Support at 10-day moving average seems fragile. LME nickel inventories were down by 354 mt to 101,574 mt.
In the Shanghai nickel spot market, traded prices were flat from Wednesday’s level. Mainstream traded prices of nickel from Russia were in the RMB 174,800-175,000/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 175,300-175,500/mt range. Weak momentum of LME nickel prices dampened trading sentiment in spot market, and transactions were quiet in spot market on Thursday.  Downstream demand was soft, and only a few consumers entered in to market. LME nickel prices still struggled around USD 24,000/mt, and fluctuation band fell to certain extent, dampening market confidence and triggering wait-and-see sentiment from traders. 


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