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SMM Daily Review – 2011/8/2 Base Metals Market
Aug 3,2011 09:42CST
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As LME copper prices slumped overnight, SHFE 1110 copper contract prices, the most active one, opened down RMB 980/mt at RMB 72,410/mt on Tuesday.

SHANGHAI, Aug. 3 (SMM)--

As LME copper prices slumped overnight, SHFE 1110 copper contract prices, the most active one, opened down RMB 980/mt at RMB 72,410/mt on Tuesday. After opening, both the longs and shorts closed positions in a large scale. Coupled with the resistance at USD 9,700/mt for LME copper prices and a nearly 2% slump in the Shanghai Composite Index, SHFE copper prices lost RMB 72,000/mt during the trading hours, declining as low as RMB 71,930/mt, with the fluctuating band within RMB 200/mt. Finally, the most actively-traded copper contract prices closed at RMB 72,010/mt, down RMB 1,380/mt or a loss of 1.88%. Positions for the most actively-traded copper contracts were down 10,238 lots and trading volumes were down 18,576 lots. The support at the 20-day moving average was weak, but earlier low-end SHFE copper prices were not broken through, with slower declining pace.

In spot market, copper discounts fell significantly to negative RMB 250-180/mt, as SHFE copper prices moved lower after a low open, and since copper supply contracted due to unwillingness in selling goods from optimistic speculators. Trade prices for standard-quality copper were between RMB 71,630-71,700/mt in the morning business, and RMB 71,650-71,750/mt for high-quality copper. Some traders with optimistic outlooks chose opportunities to make appropriate deals, while downstream producers made purchases at low prices, resulting in an improvement in market transactions. SHFE copper prices continued to fall in the afternoon session, and copper discounts for high-quality copper were reported between negative RMB 200-150/mt. Traded prices were between RMB 71,550-71,750/mt, and trading sentiment was lower compared with the morning session.    

As LME aluminum prices fell overnight, most active SHFE 1110 aluminum contract prices opened lower at RMB 18,350/nt on August 2nd. After sluggish Shanghai Composite Index forced some longs to exit the market, with total positions of SHFE 1110 aluminum contracts decreasing by 14,000 lots, SHFE aluminum prices struggled at the 5-day moving average. Finally closed price was RMB 18,340/mt, down RMB 205/mt or 1.11% from previous trading day. Though most active SHFE aluminum contract prices erased gains on the previous day, downward pace of aluminum prices was relatively slower than that of other metals prices. SMM expects bearish sentiment in other metals markets will drag down aluminum prices to test RMB 18,300/mt in the short term.

Morning traded prices of spot aluminum in Shanghai on August 2nd were between RMB 18,500-18,530/mt, with premiums of positive RMB 50-80/mt over SHFE current-month aluminum prices. After SHFE current-month aluminum prices opened lower and tested RMB 18,500/mt, selling interest at lower prices was low among goods holders, which helped spot aluminum prices consolidate at RMB 18,500/mt. Market transactions were slightly sluggish due to strong wait-and-see sentiment among downstream buyers and middlemen. In the afternoon, SHFE current-month aluminum prices narrowly fluctuated, and spot premiums were maintained at positive RMB 80/mt over SHFE current-month aluminum prices. Mainstream traded prices were between RMB 18,470-18,500/mt. Market transactions were rarely reported due to strong wait-and-see sentiment.

On Tuesday, SHFE 1110 zinc contract prices opened lower at RMB 18,690/mt, then fell in the morning session, with prices mostly moving between RMB 18,450-18,550/mt during the day. Finally, SHFE 1110 zinc contract prices closed at RMB 18,455/mt, down RMB 405/mt, or down 2.15%. Total positions continued decreasing, with a large number of longs leaving the market. Market players took a mixed attitude as zinc prices fell below RMB 18,500/mt.

SHFE zinc prices opened lower and moved below the moving average in the morning session, and spot zinc prices fell in response. #0 zinc was traded between RMB 18,050-18,100/mt, with discounts of negative RMB 430-450/mt against SHFE 1110 zinc contract prices. #1 zinc was traded around RMB 18,030/mt. Traders were aggressively moving goods, while downstream buyers purchased modestly at lower prices. Spot discounts narrowed to negative RMB 400-420/mt in the afternoon along with dropping SHFE zinc prices, with spot zinc prices quoted around RMB 18,050/mt. But transactions were quiet.

On Tuesday, SHFE lead prices opened lower at RMB 17,450/mt, then fell along with dropping stocks, with prices generally moving below the moving average. SHFE lead prices fluctuated shortly as of 10:00 am, but then trended downward in tandem with falling LME lead prices. In the afternoon, SHFE lead prices fluctuated between RMB 17,160-17,240/mt, and further plunged to RMB 17,075/mt, finding support at the 60-day moving average, and with prices finally closing at RMB 17,190/mt, down RMB 365/mt. Trading volumes increased by 332 lots to 1,648 lots, and total positions decreased by 162 lots to 5,802 lots.

As SHFE lead prices opened lower, spot lead ingot prices fell RMB 150/mt from the previous day. The well-known brand Chihong Zn & Ge was quoted between RMB 16,900-16,950/mt, with discounts narrowing to negative RMB 350-400/mt against SHFE 1109 lead contract prices. Other brands such as Jinguan were quoted between RMB 16,800-16,850/mt. In the afternoon, offers for Chihong, Nanfang and Yuguang brands were between RMB 16,800-16,850/mt as spot lead prices fell along with SHFE lead prices, and other brands were quoted between RMB 16,720-16,750/mt. Traders were moving goods actively due to falling SHFE lead prices, while downstream buyers were cautious, leaving transactions muted.

Falling LME tin prices and weak consumption pressed Shanghai tin prices slightly lower on August 2nd. Main traded brands were Yunxi, Yunheng and Nanshan, with mainstream traded prices between RMB 203,500-205,000/mt. As tin prices fell, wait-and-see attitude turned stronger among downstream buyers, which dampened the already sluggish market sentiment. Tin supplies remained limited as major smelters were influenced by power as well as environmental restrictions which led to unstable output. Consumption is still weak entering August, and time is needed for the conventional peak season to come. Recent fundamentals are also not good enough for tin prices to rise.

LME nickel for delivery in three months opened at USD 24,901/mt and closed at USD 24,635/mt on Monday, down by USD 258/mt from a day earlier, with the highest price at USD 25,195/mt and the lowest price at USD 24,451/mt. LME nickel futures contract for delivery in three months fluctuated lower to hit the lowest of USD 24,451/mt after opening at USD 24,650/mt during the Asian trading hours on Tuesday. LME nickel prices struggled around 5-day moving average, with support at USD 24,300/mt.LME nickel inventories were down by 156 mt to 102,942 mt.
Overall transactions were extremely quiet in the Shanghai nickel spot market. Affected by Monday’s LME nickel price decline, and Tuesday’s weak performance of LME nickel prices and price decline of neighboring metals, traders’ interest in making deals was low and they largely adopted a wait-and-see attitude. Traded prices fell below RMB 180,000/mt. Mainstream traded prices of nickel from Russia were in the RMB 179,500-180,000/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 179,800-180,500/mt range, with mixed offers reported. Comparatively speaking, transactions were more brisk in the morning trading hours than in the afternoon trading hours. Some traders almost reported no deals in recent days, and demand was extremely soft.

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