SMM Daily Review - 2011/8/4 Base Metals Market

SHANGHAI, Aug. 5 (SMM) --
Copper:
As LME copper prices slumped overnight, SHFE 1110 copper contract prices, the most active one, opened down RMB 430/mt at RMB 71,630/mt on Thursday, with prices fluctuating weakly during the whole trading day given resistance at the daily moving average. Due to a rebounding US dollar index, the resistance at USD 9,600/mt for LME copper prices, as well as weak domestic stock markets, SHFE three-month copper contract prices fell to a low at RMB 71,200/mt, and kept fluctuating around RMB 71,550/mt after gaining support at the 30-day moving average. SHFE three-month copper contract prices followed LME copper prices to return above the daily moving average at the tail of trading, paring previous declines, as the US dollar index fell after initially increasing. Finally, the most actively-traded copper contract prices closed at RMB 71,610/mt, down RMB 450/mt or 0.62%. Positions for the most actively-traded copper contracts were down 2,696 lots, while trading volumes were up 23,974 lots. SHFE three-month copper contract prices lowered to test the 30-day moving average after losing the 20-day moving average twice, and were expected to fall further due to the downside technical index. 

In spot market, as SHFE copper prices moved lower after a low open and cargo-holders were reluctant to sell at lows, offers tended to change from discounts to premiums. In particular, offers for the leading “Guixi” brand held firm between discounts of negative RMB 0/mt and slight premiums. Market transactions reduced, and mainly came from participants for the purpose of hedge trading. Spot copper discounts were quoted between negative RMB 50-30/mt. Trade prices for standard-quality copper were between RMB 71,350-71,400/mt, and RMB 71,400-71,450/mt for high-quality copper. Trader’s buying interest was dampened due to a significant drop in copper discounts, while downstream producers continued to make purchases at lows, resulting in modest trading volumes. In the afternoon session, spot copper offers all returned to discounts between negative RMB 100-20/mt. Traded prices and trading sentiment were little changed from the morning session.            

Aluminum:
After opening at RMB 18,460/mt on August 4th, most active SHFE 1110 aluminum contract prices quickly plunged to below 5-day and 10-day moving averages in the morning session, and closed at RMB 18,135/mt, down RMB 335/mt from previous trading day after a slight rebound. Market confidence turned low after SHFE aluminum prices plunged with a huge 3% loss within 10 minutes. SMM expects aluminum prices to keep fluctuating in the short term before new data is released.

After opening at RMB 18,460/mt on August 4th, most active SHFE 1110 aluminum contract prices quickly plunged to below 5-day and 10-day moving averages in the morning session, and closed at RMB 18,135/mt, down RMB 335/mt from previous trading day after a slight rebound. Market confidence turned low after SHFE aluminum prices plunged with a huge 3% loss within 10 minutes. SMM expects aluminum prices to keep fluctuating in the short term before new data is released.

Lead:
On Thursday, SHFE lead prices opened lower at RMB 17,080/mt, and once surged to RMB 17,095/mt but met resistance at the 60-day moving average. Later, SHFE lead prices fell to the moving average, and plummeted to RMB 16,870/mt at 10:00 am, the lowest level since June 28. In the afternoon, SHFE lead prices stabilized between RMB 16,920-16,970/mt, with prices finally closing at RMB 16,920/mt, down RMB 170/mt, or down 0.99%. Total positions decreased by 248 lots to 5,202 lots, and trading volumes decreased by 350 lots to 692 lots.

SHFE lead prices opened low and moved lower. In domestic spot markets, well-known brands of spot lead such as Nanfang were quoted around RMB 16,650/mt, with discounts of negative RMB 300-380/mt against SHFE 1109 lead contract prices. Other brands such as Jinguan and Baiyin were quoted between RMB 16,520-16,600/mt. In the afternoon, prices of Nanfang brand fell to RMB 16,600/mt, keeping smelters out of the market. Downstream buyers were cautious, leaving transactions still quiet.

Zinc:
On Thursday, SHFE 1110 zinc contract prices opened lower at RMB 18,280/mt due to weak LME zinc prices overnight, with prices touching RMB 18,380/mt but falling later. SHFE 1110 zinc contract prices mostly moved between RMB 18,200-18,300/mt during the day, and finally closed at RMB 18,250/mt, down RMB 165/mt, or down 0.9%, below the 30-day moving average. Trading volumes increased by over 20,000 lots to 300,368 lots, and total positions decreased by 5,620 lots to 235,400 lots, and with the longs struggling with the shorts.

SHFE 1110 zinc contract prices opened lower, meeting resistance at the 30-day moving average, and spot zinc prices fell in response. #0 zinc was traded between RMB 17,880-17,830/mt, with discounts of negative RMB 380-400/mt against SHFE 1110 zinc contract prices. #1 zinc was traded around RMB 17,850/mt. Downstream buyers began to stand on the sidelines, keeping transactions weaker. Smelters were holding onto their goods, while arbitragers were actively moving goods, so goods supply available was sufficient.

Tin:
After LME tin prices fell for a fifth consecutive day with the falling trend unchanged, spot tin prices in Shanghai also slipped continuously on August 4th. Mainstream traded brands were Yunxi and Nanshan, with trading prices between RMB 202,300-203,500/mt. Continuous falling of tin prices led to stronger wait-and-see attitude among purchasers, and market transactions turned even more sluggish. EXW quote of Yunxi branded tin was lowered to RMB 208,000/mt, but still higher than mainstream market price. In a nutshell, falling pace of tin prices was relatively slow supported by limited supply.

Nickel:
LME nickel for delivery in three months opened at USD 24,650/mt and closed at USD 23,920/mt on Wednesday, down by USD 780/mt from a day earlier, with the highest price at USD 24,685/mt and the lowest price at USD 23,831/mt. On Thursday, LME nickel prices opened at USD 23,950/mt and later fluctuated lower after slight advance during the early Asian trading hours. LME nickel prices accelerated decline and hit a low of USD 23,500/mt during the European trading hours, weighed down by surge of the US dollar. After falling below 30-day moving average, LME nickel prices may fall to test USD 60-day moving average at 23,300/mt. LME nickel inventories were down by 120 mt to 102,780 mt.

In the Shanghai nickel spot market, spot prices slipped sharply along with Wednesday’s LME nickel price tumble. Mainstream traded prices of nickel from Russia were in the RMB 177,000-177,300/mt range, with some deals also made between RMB 176,500-177,000/mt, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 175,500-178,000/mt range, with some deals also made around RMB 177,300/mt. Generally speaking, transactions at high-end prices were limited, while transactions at low-end prices were moderate. Market sentiment was bearish. An increasing number of market players began to adopt a wait-and-see attitude, with cautious transactions reported. 

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