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SMM Daily Review - 2011/7/28 Base Metals Market
Jul 29,2011 09:51CST
smm insight
SHFE 1110 copper contract prices, the most active one, opened RMB 430/mt lower at RMB 72,400/mt on Thursday;Most active SHFE 1110 aluminum contract prices opened higher at RMB 18,270/mt on July 28.

SHAGNHAI, Jul. 29 (SMM) –

SHFE 1110 copper contract prices, the most active one, opened RMB 430/mt lower at RMB 72,400/mt on Thursday, with prices moving higher after a low open during the whole trading day. LME copper prices kept fluctuating in the morning business, as LME copper prices only increased slightly due to a drop in the US dollar index, and since a weak stocks market dragged down copper prices. In the afternoon session, SHFE three-month copper contract prices increased to RMB 72,850/mt and reached a high level of RMB 73,010/mt before the closing, as LME copper prices returned at USD 9,800/mt and the Shanghai Composite Index came back to 2,700 points. However, SHFE three-month copper contract prices later fell from previous gains due to large-scale position buildings by the shorts. Finally, the most actively-traded copper contract prices closed at RMB 72,750/mt, down RMB 80/mt or a loss of 0.11%. Positions for the most actively-traded copper contracts were up 3,224 lots and trading volumes were up 31,764 lots, and the ending prices stood above the 5 and 10-day moving averages.  

In the spot market, due to weak consumption and cash flow pressures at the month-end, copper discounts increased to negative RMB 420-300/mt on Thursday after SHFE copper prices moved higher after a high open. Trade prices for standard-quality copper were between 71,750-71,900/mt in the morning business, and RMB 71,800-71,950/mt for high-quality copper. Market supply was dominated by domestic copper, and cargo-holders with long-term contracts were active in moving goods for cash generation before the month-end, with no fears towards high copper discounts, while imported copper reduced due to a falling SHFE/LME copper price ratio, with limited imported goods seen in the market. Downstream producers were not only wary of high prices but also hampered by cash flow problems, making limited buying and resulting in quiet market transactions. Spot copper discounts rose slightly following continuous gains in SHFE copper prices in the afternoon session. Offers for high-quality copper like the "Guixi" brand were held firm at RMB 72,000/mt. Low trading sentiment remained and would continue during the last trading days of this month.  

Most active SHFE 1110 aluminum contract prices opened higher at RMB 18,270/mt on July 28, and surged by nearly 2% in the morning, hitting RMB 18,570/mt. In the afternoon, SHFE 1110 aluminum contract prices erased early gains due to stronger short momentum (short position momentum), and finally closed at RMB 18,360/mt, up RMB 150/mt or 0.82% from previous trading day. Total positions increased by nearly 50,000 lots as longs and shorts actively entered the market. Daily transaction volume increased significantly by 273,000 lots from previous trading day. As SHFE aluminum prices failed to break through RMB 18,400/mt for two successive days due to intense struggles between long and short investors, more upward momentum is needed for SHFE aluminum prices to rise further.
Traded prices of spot aluminum in Shanghai on July 28th were between RMB 18,610-18,650/mt, with premiums of positive RMB 0-30/mt over SHFE current-month aluminum prices. In the morning, after SHFE aluminum prices surged by nearly 2%, spot aluminum prices also jumped by 2.36%. As a result, selling interest significantly increased among goods holders. Some of the goods holders who had been previously building up inventories even offered quotes below SHFE current-month aluminum prices. However, due to current high prices, purchasing interest was quite low among downstream processors and even among middlemen, with spot premiums quickly narrowing to near zero. In the afternoon, after SHFE current-month aluminum prices fell below RMB 18,600/mt, offers for spot aluminum rose from slight discounts to slight premiums over SHFE current-month aluminum contract prices Mainstream traded prices of spot aluminum were between RMB 18,560-18,600/mt. Market transactions were extremely limited as purchases were rare.

On Thursday, SHFE 1110 zinc contract prices surged to RMB 19,160/mt in the morning session, then fell along with dropping Shanghai Stock Exchange composite index. Later, SHFE 1110 zinc contract prices fell further to RMB 18,850/mt as a large number of longs left the market after profit-taking, then found support at the 5-day moving average, moving between RMB 18,900-19,000/mt and closing at RMB 18,910/mt, down RMB 100/mt. Trading volumes increased by over 100,000 lots to 414,054 lots, and total positions decreased by 15,650 lots to 253,844 lots, with the long momentum stronger.

SHFE 1110 zinc contract prices plunged in the morning session. #0 zinc was traded between RMB 18,480-18,500/mt, then fell to RMB 18,320-18,350/mt in tandem with SHFE zinc prices, with discounts against SHFE 1110 zinc contract prices negative RMB 580/mt. #1 zinc was traded around RMB 18,300/mt. The market was cautious as zinc prices fell, keeping the overall transactions quiet.

On Thursday, SHFE lead prices opened at RMB 17,700/mt and moved around the moving average during the day. Dragged down by SHFE zinc prices, SHFE lead prices met resistance at the moving average at noon, but resisted declines. At the end of trading, SHFE lead prices rallied following rising domestic stock markets to close at RMB 17,700/mt, down RMB 40/mt. Trading volumes of SHFE 1109 lead contracts decreased by 584 lots to 2,036 lots, and total positions decreased by 430 lots to 6,766 lots. Trading volumes of SHFE 1110 lead contracts increased further by 578 lots to 2,880 lots.

SHFE lead prices fell after opening in the morning session, depressing market players buying interest, and spot lead prices dropped in response. Offers for brands such as Chihong Zn & Ge, Nanfang and Shuikoushan were between RMB 17,100-17,150/mt, with discounts of negative RMB 500/mt, leaving transactions muted. Other brands such as Baiyin, Hanjiang and Jinguan were quoted between RMB 17,050-17,080/mt. Well-know brands were quoted between RMB 17,100-17,150/mt as SHFE lead prices rose at the end of trading, with transactions improving. Unknown brands were still traded between RMB 17,050-17,100/mt. Transactions from traders and downstream buyers were limited due to cash flow problems at the end of the month.

Tin prices were kept stable in Shanghai on July 28th. Despite LME aluminum prices stood steady and gradually rose towards USD 29,000/mt, no significant rise of domestic tin prices was seen, with mainstream traded prices remaining between RMB 205,500-206,500/mt. Mainstream traded tin brands were Yunxi, Yunheng, Nanshan and Jinlong during the day. Though quotes of tin prices hit RMB 207,000/mt in the morning, market transactions were not significantly changed mainly due to seasonal weak consumption. Sluggish market transactions in turn dampened upward momentum of tin prices. Even though smelters have been keeping their quotes firm, its power to push up tin prices is relatively limited.

LME nickel for delivery in three months opened at USD 24,100/mt and closed at USD 24,400/mt on Wednesday, up by USD 250/mt from a day earlier, with the highest price at USD 24,500/mt and the lowest price at USD 24,045/mt. LME nickel prices opened at USD 24,300/mt and fluctuated narrowly around this level during morning trading hours on Thursday, but surged to hit a high of USD 24,690/mt and then fell slightly to USD 24,600/mt during the afternoon trading hours. LME nickel inventories were down by 66 mt to 102,930 mt on Thursday.

Jinchuan Group raised ex-works nickel prices by RMB 2,000/mt to RMB 176,000/mt on Thursday, boosting spot nickel prices to certain extent. Shanghai nickel spot prices rose rapidly to stand above RMB 176,000/mt. However, transactions were limited when LME nickel prices were relatively weak in the morning trading hours, but transactions improved and traded prices were between RMB 176,000-176,500/mt when LME nickel prices surged during the afternoon trading hours. Overall transactions were moderate. As supply of nickel from Russia was limited, prices of Russian nickel were firm. It was reported that some Russian nickel arrived at ports, but traders were still reluctant to move goods due to optimistic expectation, leading to limited supply of nickel from Russia.


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