SMM Daily Review – 2011/7/26 Base Metals Market

SHAGNHAI, Jul. 27 (SMM) –

Copper
SHFE 1110 copper contract prices, the most active one, opened up RMB 40/mt at RMB 71,770/mt on Tuesday, with prices moving higher after a high open during the whole trading day. As LME copper prices challenged USD 9,800/mt, SHFE three-month copper contract prices directly challenged RMB 72,900/mt after breaking through RMB 72,000/mt and the 5 and 10-day moving averages, but met resistance after touching a high level at RMB 72,850/mt. Finally, the most actively-traded copper contract prices closed at RMB 72,810/mt, up RMB 1,140/mt or a gain of 1.59%. Positions for SHFE 1110 copper contracts were up 14,542 lots, and trading volumes were up 30,106 lots. Market players regained confidence for a rebound in SHFE three-month copper contract prices after prices pared losses at the 5 and 10-day moving averages.

In the spot market, SHFE copper prices moved higher after a high open, and cargo-holders were active in moving goods at high prices, with significantly high market supply compared with the previous trading day. In this context, copper discounts were quoted between negative RMB 350-250/mt. Trade prices for standard-quality copper were between 71,650-71,750/mt, and RMB 71,720-71,800/mt for high-quality copper. Despite copper discounts, traders made limited transactions given high market risks, while downstream producers continued to stand on the sidelines due to high prices, resulting in oversupply in the market. As SHFE copper prices increased by more than RMB 400/mt in the afternoon session, copper discounts rose to negative RMB 500-350/mt. Traded prices were pushed up to RMB 71,900/mt. High copper discounts attracted some traders to make purchases, but overall trading remained limited.    

Aluminum
A bull market for SHFE aluminum contracts was seen on July 26th. In the morning, after opening at RMB 17,650/mt and consolidating at RMB 17,700/mt, most active SHFE 1110 aluminum contract prices surged and hit RMB 17,910/mt. In the afternoon, after regaining confidence, the longs pushed up SHFE aluminum prices which led base metals to gain and quickly broke RMB 18,000/mt. Finally closed price was RMB 18,015/mt, with a huge jump of RMB 350/mt or 1.98% from previous trading day. Total positions of most active SHFE aluminum contracts drastically increased by 34,378 lots to 158,358 lots. After SHFE aluminum prices surged by nearly 2% to break the RMB 18,000/mt mark, short-selling increased, and SMM expects SHFE aluminum prices to fluctuate at RMB 18,000/mt in the short term.

Traded prices of spot aluminum in Shanghai on July 26th were between RMB 17,980-18,000/mt, with premiums of positive RMB 50-100/mt over SHFE current-month aluminum prices. In the morning, after SHFE aluminum prices surged by 1%, spot aluminum prices also climbed and hit RMB 18,000/mt. With rising prices, goods holders remained optimistic towards aluminum prices and were actively building up inventories while keeping premiums firm. Market transactions were limited as a result of scarce supply. In the afternoon, after SHFE aluminum prices gained another 1%, spot aluminum prices also rose with premiums falling to zero. Mainstream traded prices of spot aluminum were between RMB 18,050-18,070/mt. Goods holders have been continuously holding goods. Downstream purchase interest was relatively low. Only few purchases were reported among middlemen.

Zinc
On Tuesday, SHFE 1110 zinc contract prices opened lower at RMB 18,470/mt, hitting RMB 18,950/mt at noon due to falling US dollar index, then falling to close at RMB 18900/mt, up 1.31%. Trading volumes increased by 67,710 lots to 299,262 lots, and total positions increased by 28,346 lots to 243,832 lots. SHFE zinc prices should meet stronger resistance at RMB 19,000/mt.

SHFE 1110 zinc contract prices pared previous losses. #0 zinc was traded between RMB 18,180-18,200/mt, then rose to RMB 18,200-18,230/mt along with SHFE zinc prices, with spot discounts expanding to RMB 450-500/mt. Traders increased purchases while downstream buyers were cautious. #1 zinc traded between RMB 18,130-18,180/mt, with transactions quiet. SHFE zinc prices rose further in the afternoon, keeping transactions muted.

Lead
On Tuesday, SHFE lead prices opened lower and then moved up boosted by a weakening US dollar index, with prices mainly fluctuating between RMB 17,470-17,530/mt. In the afternoon, SHFE lead prices were pushed up due to strong buying activities at RMB 17,530/mt and rising stock prices, with prices rising to RMB 17,695/mt, making up previous losses. Finally, SHFE lead prices closed at RMB 17,635/mt, up RMB 225/mt or 1.29%. Trading volumes were 1,822 lots, up 398 lots; positions were 7,960 lots, down 574 lots.

In China’s domestic lead spot markets, prices were not boosted significantly on Tuesday and almost unchanged from a day earlier. Offers for Nanfang and Chihong brands were RMB 17,000-17,050/mt, with spot discounts at negative RMB 450-500/mt, while other brands such as Shuangyan and Baiyin were quoted between RMB 16,950-16,970/mt. In the afternoon, spot prices moved up along with rising SHFE lead prices and stood above RMB 17,000/mt, with well-known branded lead prices at RMB 17,100-17,150/mt and unknown brands at RMB 17,000-17,050/mt. Most market players were staying out of the market in the morning, and transactions improved in the afternoon, but high-priced transactions remained limited.

Tin
As spot tin prices lost more upward momentum during the low-demand season, goods holder were little interested for trading, market transactions were sluggish as a result. Thought LME tin prices closed lower overnight, spot tin prices in Shanghai tin markets were little changed from the previous day. Mainstream traded tin brands were Yunxi, Yunheng and Nanshan. Supply of Yunxiang and Guangsheng branded tin was also reported, but transactions were rare. Mainstream traded prices were RMB 205,500-206,500/mt. In the afternoon, a few quotes of Nanshan branded tin for capital were reported. In order to reach a deal, these quotes were moderately lowered to RMB 205,000/mt. Most smelters have kept their quotes firm and only supplied at small volumes, which will support tin prices in the short term.

Nickel
LME nickel for delivery in three months opened at USD 23,950/mt and closed at USD 23,846/mt on Monday, down by USD 104/mt from a day earlier, with the highest price at USD 23,976/mt and the lowest price at USD 23,689/mt. Supported by weaker US dollar, LME nickel futures contract for delivery in three months advanced to hit a high of USD 24,248/mt during the Asian trading hours on Tuesday. LME nickel prices still fluctuated narrowly and met strong resistance at USD 24,300/mt, with upward momentum gradually waning. LME nickel inventories were up by 780 mt to 102,486 mt.

Affected by decline in LME nickel prices on Monday, transactions in spot market became even quieter. Coupled with rent unclear trend, traders were unwilling to move goods for optimistic expectation, while purchasers had low buying interest due to price acceptance, resulting in stalled trading sentiment. Limited transactions were only made during the morning trading hours, as traders’ reluctance to move goods grew when LME nickel prices advanced in the afternoon trading hours. In the morning trading hours, traded prices of nickel from Jinchuan Group were between RMB 174,800-175,000/mt and traded prices of nickel from Russia were between RMB 174,300-174,500/mt. In the afternoon trading hours, traded prices of nickel from Jinchuan Group advanced to RMB 175,300-175,500/mt, and nickel from Russia advanced to RMB 174,600/mt. Few downstream consumers entered market, and deals were largely done among traders.