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SMM Daily Review - 2011/8/9 Base Metals Market
Aug 10,2011 09:56CST
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Source:SMM
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SHANGHAI, Aug. 10 (SMM) --

Copper:

As LME copper prices overnight plummeted by more than USD 300/mt due to panic sell-off pressures, opening prices directly fell to USD 8,500 in the morning business on Tuesday. In this context, SHFE 1110 copper contract prices, the most active one, opened down RMB 4,060/mt or 6% at RMB 63,560/mt on Tuesday, and the shorts reported profit-taking soon after the opening. The Shanghai Composite Index broke through 2,500 points and dropped to 2,437 points, and China later announced July’s CPI data set a new record high, adding to market expectations of interest rate hikes. As a result, SHFE three-month copper contract prices fluctuated narrowly around RMB 64,100/mt. In the second trading session, the US dollar index fell back to 74.5 from 74.9, helping LME and SHFE copper prices increase from their initially falling trends. In the afternoon session, SHFE three-month copper contract prices reached a high at RMB 66,030/mt since some longs entered into the market to make bottom fishing, narrowing the daily losses. Finally, the most actively-traded copper contract prices closed at RMB 65,960/mt, down RMB 1,660/mt, or a loss of 2.45%. Trading volumes and positions for the most actively-traded copper contracts were up 130,000 lots and 5,072 lots, respectively. SHFE copper prices experienced a technical rebound on Tuesday, and future price movements will depend on global financial markets’ response to the Fed interest rate discussion meeting held Tuesday evening.        

In spot market, as SHFE copper prices continued to open lower in the morning business, copper premiums increased to positive RMB 150-250/mt, but then reduced to positive RMB 0-50/mt when SHFE copper prices slightly rebounded. Trade prices for standard-quality copper were between RMB 64,450-64,900/mt in the morning session, and RMB 64,500-65,000/mt for high-quality copper. Rapid declines in copper premiums reflected continuous panic sell-off sentiment. Downstream producers remained active in purchasing at low prices, while traders reduced transactions given high copper premiums, small profit margins and declining prices. In the afternoon session, SHFE copper prices advanced again, stimulating market participants for hedge trading to actively move goods. As a result, spot copper offers turned into discounts of negative RMB 100-50/mt. However, some market players with optimistic outlooks actively entered into the market for purchases, quickly pushing offers to premiums of positive RMB 0-50/mt. Traded prices rose to RMB 65,400-65,800/mt, and trading sentiment improved. Daily traded prices fell first, and then increased. Markets were waiting to see whether or not the Fed interest rate discussion meeting held Tuesday evening could ease global investor worries. 

Aluminum:

Plunging global financial markets overnight dragged SHFE aluminum contract prices to gap lower for a third consecutive day by over 4% at RMB 16,510/mt on August 9th. All aluminum contracts fell to a stop at the beginning of trading, but soon reopened supported by buying at low prices and attempted to recover the gap. In the afternoon, with inflow of long capital, SHFE aluminum prices stood steady at RMB 17,000/mt and hit an intraday high of RMB 17,340/mt. SHFE aluminum prices closed slightly lower at the 60-day moving average RMB 17,265/mt, up RMB 155/mt or 0.91%. After SHFE aluminum prices rallied, the shorts exited the market, which attracted the longs to buy at lower prices with SHFE aluminum prices gaining despite falling of other metals prices. Positions of most active SHFE aluminum contract also rallied by 4,254 lots, which boosted market confidence at RMB 17,000/mt. SMM expects SHFE aluminum prices will keep struggling at the 60-day moving average in the short term while recovering previous gaps.

Trading prices of spot aluminum in Shanghai on August 9th were between RMB 17,570-17,610/mt, with premiums of positive RMB 120-150/mt over SHFE current-month aluminum prices. SHFE aluminum prices gapped lower for 3 successive days with slight rebounds later attempting to recover the gap, which boosted goods holders’ confidence to quote with high premiums. During spot trading hours, after SHFE aluminum prices climbed steadily, spot premiums slightly narrowed, attracting some downstream buyers and middlemen to purchase thereby lifting up market sentiment. In the afternoon, SHFE current-month aluminum prices accelerated the rising pace, which led spot aluminum prices to surge from the opening RMB 17,600/mt to RMB 17,750/mt. However, buying interest among purchasers turned significantly lower afterwards, with only few transactions below RMB 17,700/mt reported.

Lead:

On Tuesday, SHFE 1110 lead contract prices opened lower at RMB 15,495/mt then fell to RMB 15,200/mt, but rallied to fluctuate at RMB 15,580/mt later the day. Boosted by stock markets and LME lead prices, SHFE lead prices stood at RMB 15,600/mt as of 10:00 am, with prices finally closing at RMB 16,025/mt in the afternoon, down RMB 225/mt. Trading volumes increased by 1,724 lots to 4,860 lots, and total positions increased by 288 lots to 4,458 lots, with transactions brisk.

As SHFE lead prices fell then rallied in the morning session, domestic well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 15,350-15,600/mt, with discounts of negative RMB 260-300/mt against SHFE 1110 lead contract prices. Other brands such as Baiyin and Hanjiang were quoted around RMB 15,330/mt. SHFE lead prices rose further in the afternoon, pushing up lead prices to RMB 15,550-15,650/mt. Both traders and downstream buyers increased purchases at lower prices, keeping transactions brisk.

Zinc:

On Tuesday, SHFE 1110 zinc contract prices fell by the daily limit after opening due to plunged LME zinc prices overnight, and generally moved between RMB 15,700-15,800/mt later in the morning session. As the Shanghai Stock Exchange composite index and LME zinc prices rose at noon, SHFE 1110 zinc contract prices climbed to RMB 16,200-16,300/mt, with prices closing at RMB 16,400/mt. Trading volumes increased by over 70,000 lots to 691,112 lots, while total positions decreased by 11,558 lots to 196,528 lots.

In domestic spot markets, #0 zinc was traded between RMB 15,650-15,700/mt, with discounts of negative RMB 200-230/mt against SHFE three-month zinc contract prices. In tandem with rising SHFE zinc prices, traded prices of #0 zinc rose to RMB 15,950-16,000/mt, with discounts remaining unchanged. #1 zinc was traded between RMB 15,900-15,950/mt. Downstream buyers began to stand on the sidelines due to continuing falling zinc prices, leaving transactions quit. As SHFE zinc prices rose further in the afternoon, spot prices were up to RMB 16,000-16,100/mt, causing downstream buyers to increase purchases and causing transactions to improve.

Tin:

Spot tin price continued its falling trend in Shanghai on August 9th. Mainstream trading prices fell to RMB 190,000-192,000/mt as a result of panic selloff caused by continuously plunging LME tin prices. Mainstream trading brands were Yunxi and Nanshan. Market transactions in the morning were extremely sluggish with a lowest RMB 189,500/mt trading price of Nanshan branded tin reported. In the afternoon, spot tin prices slightly rebounded following a rebound of tin prices in London, and market transactions also slightly improved. Most smelters took a wait-and-see attitude and transactions were rarely reported. Meanwhile, with LME tin prices down by over 20%, domestic tin prices have seen a relatively slow falling pace, creating import margins. It is reported that Indonesian and Malaysian tin futures were quoted between RMB 184,000-185,000 in Shanghai tin market, with a delivery term of 20-30 days. However, market transactions were not heard.

Nickel:

LME nickel for delivery in three months opened at USD 22,525/mt and closed at USD 21,401/mt on Monday, down by USD 1,299/mt from a day earlier, with the highest price at USD 22,600/mt and the lowest price at USD 21,200/mt. On Tuesday, as market continued to be affected by concern over the global economic growth following the US credit cut, LME nickel prices fell rapidly to USD 20,200/mt after opening at USD 21,255/mt. Later, supported by weaker US dollar and technical correction, LME nickel prices rebounded to USD 21,900/mt. During the early European trading hours, LME nickel prices slipped again due to firm US dollar, with support at USD 20,000/mt. LME nickel inventories were up by 6 mt to 102,582 mt.

In the Shanghai nickel spot market, Monday’s slump in LME nickel price and Tuesday’s low open of LME nickel prices significantly dragged down spot nickel prices by RMB 10,000/mt. Although ex-works nickel prices from Jinchuan Group were firm, spot nickel prices fell below RMB 160,000/mt in the market. In the morning trading hours, transactions were sluggish, with mainstream traded prices of nickel from Russia in the RMB 156,000-156,500/mt range, and mainstream traded prices of nickel from Jinchuan Group in the RMB 158,000-158,500/mt range. In the afternoon trading hours, LME nickel prices rebounded to certain extent, boosting spot nickel prices. However, traders were still reluctant to move goods, with a few deals made between RMB 158,000-159,000/mt. Some traders were unwilling to move goods due to sharp decline of nickel prices in recent days. However, trading sentiment was brisk in future market, as volatile price movement attracted many traders, which dampened transactions spot market to certain extent.

 

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