SMM Daily Review - 2011/8/5 Base Metals Market

SHANGHAI, Aug. 8 (SMM) --

Copper:

As LME copper prices plummeted overnight, SHFE 1110 copper contract prices, the most active one, opened down RMB 1,600/mt at RMB 69,940/mt on Friday. After opening, most of the longs were forced to close positions due to the touch of stop-loss limit, and panic drop in copper prices prompted capitals to draw from the market. In the afternoon session, given that LME copper prices fell below USD 9,200/mt, SHFE three-month copper contract prices lost RMB 69,000/mt, reaching a low level at RMB 68,530/mt. Finally, SHFE 1110 copper contract prices closed at RMB 68,570/mt, down RMB 2,970/mt, a loss of 4.15%. Positions for SHFE 1110 copper contracts were down 24,272 lots, while trading volumes were up 158,000 lots. With the shorts dominating the market and a downside for the closing, support at the 60-day moving average for SHFE three-month copper contract prices was weak.      

In spot market, as base metals prices slumped and SHFE copper prices opened lower, initial copper offers directly turned into premiums, with offers quoted between positive RMB 0-100/mt. Market players for hedge purpose reported profit-taking, and spot copper premiums failed to hold firm, with offers for standard-quality copper turning into discounts of negative RMB 40-50/mt. Trade prices for standard-quality copper were between RMB 69,500-69,600/mt in the morning business, and RMB 69,550-69,650/mt for high-quality copper. Downstream producers increased buying at low prices, resulting in brisk market transactions. SHFE copper prices continued to fall in the afternoon session, and market sentiment was bearish. In this context, spot copper premiums failed to improve, with price offers between discounts of negative RMB 30/mt and premiums of positive RMB 100, nearly flat with morning levels. The low-end traded prices for standard-quality fell below RMB 69,000/mt, and overall traded prices dropped between RMB 68,800-69,000/mt. Real trading volumes reduced compared to the morning business, and sluggish market sentiment tended to spread. Copper inventories monitored by Shanghai Future Exchange (SHFE) increased by 1,133 mt to 118,200 mt in the week ending August 5th, highlighting the characteristics of a low demand period and cautious trading, despite the buying from downstream producers within the week.      

Aluminum:

Due to plunging commodity prices overnight, most active SHFE 1110 aluminum contract prices opened lower at RMB 17,800/mt on August 5th. Within ten minutes after opening, most active SHFE aluminum contract prices fell and stopped at RMB 17,485/mt, down RMB 730/mt or 4% with positions falling by over 10,000 lots due to profit-taking and stop loss. At the tail of trading, all SHFE aluminum contract prices fell to a stop and SHFE aluminum prices slipped the most among all base metals prices. Long positions fell by over 25,000 lots during the day with bearish market sentiment growing, and most active aluminum contract prices are expected to keep falling and test RMB 17,000/mt. Latest SHFE aluminum stocks fell by 23,585 mt to 158,130 mt. SMM expects aluminum prices to keep falling this week despite continuous falling of aluminum stocks, as long capital has exited the market.

Mainstream trading prices of spot aluminum in Shanghai on August 5th were between RMB 17,930-18,030/mt, with premiums of positive RMB 200-300/mt over SHFE current-month aluminum prices. SHFE aluminum prices fell and stopped within 10 minutes after opening, which battered spot market confidence, leading to mixed quotes. At the beginning, spot premiums were lifted by goods holders to a high of RMB 300/mt in a bid to stop aluminum prices from falling below the RMB 18,000/mt mark. However, mainstream trading prices gradually dropped later, which boosted purchasers interest with purchases at lower prices slightly increasing. Overall market sentiment was slightly active. In the afternoon, SHFE current-month aluminum prices fell to a stop near the tail of trading. However, spot aluminum prices stopped falling at RMB 17,900/mt. Both suppliers and buyers turned cautious during the end of the trading week due to plunging aluminum prices, and market transactions were quite rare as a result.

Lead:

Last Friday, SHFE lead prices opened lower at RMB 16,560/mt, and slumped to RMB 15,960/mt after opening, down as much as 5.9% within ten minutes. Later the day, SHFE lead prices rallied slightly to the moving average and continue fluctuating in the afternoon, with prices finally closing at RMB 16,270/mt, down RMB 650/mt, or down 3.84%. Trading volumes increased by 1,004 lots to 1,696 lots, and total positions decreased by 970 lots to 4,232 lots.

SHFE lead prices opened lower and slide by RMB 815/mt once within in ten minutes, although prices rallied to the moving average later, market confidence was depressed. Domestic well-known brand Nanfang was quoted between RMB 16,000-16,050/mt, with discounts narrowing further to negative RMB 250-300/mt. Other brands such as Baiyin and Jianghan were quoted around RMB 15,950/mt. In the afternoon, offers for Nanfang brand fell to RMB 15,900-15,950/mt. Arbitragers were aggressively moving goods, while downstream buyers were purchasing modestly at lower prices, causing transactions to improve.

Zinc:

Last Friday, SHFE zinc prices opened lower at RMB 17,885/mt, tracking LME zinc prices overnight. In the morning session, SHFE zinc prices fell by the daily limit within 15 minutes, and then rallied to move between RMB 17,250-17,300/mt during the day. In the afternoon, SHFE zinc prices slid by the daily limit again and finally closed at RMB 17,165/mt, down RMB 1100/mt, or down 6.02%. Trading volumes increased by over 120,000 lots to 423,858 lots, and total positions decreased by 33,670 lots to 201,730 lots. A large number of longs left the market with profit-taking.

Tin:

Market transactions of tin in Shanghai were quite sluggish on August 5th. As LME tin prices plunged and consumption was weak, tin prices fell below RMB 200,000/mt during the day. Yunxi and Yunheng branded tin was traded between RMB 200,000–203,000/mt. Mainstream traded prices of Nanshan and Feidie etc. branded tin were between RMB 199,500-200,000/mt. Wait-and-see attitude among downstream purchasers turned stronger with falling tin prices, and market transactions were rarely reported as a result. However, falling pace of tin prices was relatively slow supported by limited domestic resources. LME tin prices dropped by 12% during the week from August 1st to 5th, while domestic tin pries only fell by 1.65% during the same period.

Nickel:

LME nickel for delivery in three months opened at USD 23,950/mt and closed at USD 23,605/mt last Thursday, down by USD 315/mt from a day earlier, with the highest price at USD 24,050/mt and the lowest price at USD 23,425/mt. LME nickel prices fell by USD 300/mt after opening at USD 23,420/mt during the Asian trading hours last Friday. When US dollar declined after rally, LME nickel prices pared certain losses, but still met great resistance at USD 23,300/mt. Close attention should be paid to US non-farm employment data which was due to release on Friday. LME nickel inventories were down by 126 mt to 102,654 mt.

Jinchuan Group cut ex-works nickel prices by RMB 7,000/mt to RMB 174,000/mt last Friday, dragging down domestic spot nickel prices. Mainstream traded prices of nickel from Russia were in the RMB 172,500-173,000/mt range, and were around RMB 172,000/mt in the afternoon trading hours. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 173,000-174,000/mt range. Overall trading sentiment was sluggish, and buyers tried to beat down prices. However, traders were reluctant to move goods at low price, resulting in stagnant and quiet transactions. Around 250 mt of Russian nickel arrived at ports, which contributed limitedly to market supply.