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SMM Daily Review - 2011/7/27 Base Metals Market
Jul 28,2011 09:59CST
smm insight
SHFE 1110 copper contract prices opened up RMB 560/mt at RMB 72,950/mt on Wednesday;A bull market for SHFE aluminum contracts was seen on July 26th;

SHAGNHAI, Jul. 28 (SMM) –

SHFE 1110 copper contract prices, the most active one, opened up RMB 560/mt at RMB 72,950/mt on Wednesday, with prices narrowly fluctuating around the daily moving average during the whole trading day. As LME copper prices climbed up and the Shanghai Composite Index returned above 2,700 points, SHFE three-month copper contract prices broke through RMB 73,000/mt in the afternoon session, reaching as high as RMB 73,050/mt briefly. However, large-scale position closings appeared later and dragged down SAHFE copper price gains. Finally, the most actively-traded copper contract prices closed at Tuesday’s level at RMB 72,810/mt, up RMB 420/mt or a gain of 0.58%. Positions for most actively-traded copper contracts were up 5,530 lots, while trading volumes were down 42,096 lots. Market sentiment was limited during the trading day, and the shorts reported profit-taking at highs. SHFE copper price movements were obviously lower than that of aluminum and zinc, but posted steadily rising momentum given strong financial property. Despite passive upward force, a strong copper market remained.

In the spot market, copper discounts continued to increase to negative RMB 420-300/mt as SHFE copper prices fluctuated after a high open in the morning business. Daily trade prices for standard-quality copper were between 71,850-71,950/mt, and RMB 71,900-72,050/mt for high-quality copper. Market supply was dominated by high-quality copper, as cargo-holders were reluctant to sell domestic standard-quality copper due to significantly high copper discounts. However, overall market supply was sufficient. Copper prices moved around RMB 72,000/mt, and trading volumes gradually contracted as downstream producers were still wary of trading at highs and traders were restricted by cash flow pressures despite increased discounts. Spot copper discounts rose further as SHFE copper prices challenged high prices in the afternoon session, with discounts for high-quality copper at negative RMB 380-350/mt and negative RMB 480-450/mt for standard-quality copper. Trading volumes were flat at morning levels, and remained weak before the month-end.  

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.

On Wednesday, SHFE 1110 zinc contract prices opened higher at RMB 18,950/mt, then rose following Shanghai Stock Exchange composite index. In the afternoon, SHFE 1110 zinc contract prices broke through RMB 19,000/mt to close at RMB 19,085/mt, up RMB 305/mt, or up 1.62%. Trading volumes increased by over 20,000 lots to 313,868 lots, and total positions increased by 25,662 lots to 269,494 lots, with the long momentum stronger.

SHFE 1110 opened high and moved higher, with prices struggling at RMB 19,000/mt. #0 zinc was traded between RMB 18,380-18,430/mt, with discounts of RMB 580-600/mt against SHFE 1110 zinc contract prices, and with some brands traded above RMB 18,500/mt. #1 zinc was traded between RMB 18,320-18,360/mt. Traders were actively purchasing while downstream buyers were cautious, keeping transactions quiet. Spot zinc prices rose along with SHFE zinc prices, with discounts remaining between RMB 600-630/mt, and with traded prices around RMB 18,450/mt.

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.

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.

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.


base metals;base metal prices

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