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SMM Daily Review - 2011/8/11 Base Metals Market
Aug 12,2011 10:09CST
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SHANGHAI, Aug. 12 (SMM) –


As LME copper prices overnight closed USD 104/mt lower, SHFE 1110 copper contract prices, the most active one, opened down RMB 1,140/mt at RMB 65,790/mt on Thursday. Since LME copper prices returned USD 8,800/mt due to a drop in the US dollar index and the Shanghai Composite Index moved higher from lows, SHFE three-month copper contract prices were pushed up after opening lower, narrowing daily declines, but met resistance at RMB 67,000/mt, with a high at RMB 67,070/mt. Finally, SHFE 1110 copper contract prices closed the day at RMB 66,710/mt, down RMB 220/mt or 0.33%. Positions and trading volumes for SHFE 1110 copper contracts were up 7,154 lots and 88,242 lots, respectively, while positions for SHFE 1111 copper contracts were up 15,506 lots, a signal of the continuous shift of the most actively-traded copper contracts. Despite increasing incoming capitals, the longs and shorts mainly made intraday transactions. Pressured by the 5-day moving average, SHFE three-month copper contract prices were expected to fluctuate.

In the spot market, although SHFE copper prices moved higher after a low open, panic sentiment was still dominating the market. As a result, cargo-holders were eager to move goods for cash generation, and copper discounts increased all the way to negative RMB 250-100/mt. Trade prices for standard-quality copper were between RMB 66,700-66,800/mt, and RMB 66,800-66,900/mt for high-quality copper. Speculators took advantages of discounts for high-quality copper to make purchases before the delivery dates, while downstream producers having orders and capitals continued to make purchases at low prices. However, overall market sentiment remained cautious. SHFE copper prices experienced fluctuations in the afternoon session, and spot copper discounts reduced slightly. Traded prices were nearly flat with morning levels. As trader’s buying interest weakened, transactions tended to become sluggish. 


Most active SHFE aluminum contract prices opened lower at RMB 17,480/mt on August 11th, and broke through the 30-day moving average to a high of RMB 17,765/mt in the morning with strong long momentum. Due to profit-taking in the afternoon, most active SHFE aluminum contract prices finally closed at RMB 17,635/mt after falling slightly, up RMB 120/mt or 0.69%. Positions of most active SHFE aluminum contract fell by over 15,000 lots as a result of limited upward space. However, SHFE aluminum prices stood steady again at the 5-day moving average after previous plunge, which outperformed other metals. As aluminum prices stopped falling and stabilized, long confidence grew in response. SMM expects SHFE aluminum prices to struggle at RMB 17,600/mt in the short term.

Morning trading prices of spot aluminum in Shanghai on August 11th were between RMB 18,080-18,120/mt, with premiums of positive RMB 0-50/mt over SHFE current-month aluminum prices. During spot trading hours, SHFE current-month aluminum prices struggled at RMB 18,100/mt, and goods holders actively increased supplies with slight premiums. However, with the delivery date approaching, buying interest was low among purchasers due to premiums, which dragged down mainstream trading prices, market transactions were also rare. In the afternoon, as SHFE current-month aluminum price narrowly fluctuated near RMB 18,000/mt, spot premiums almost fell to zero. Mainstream trading prices in the afternoon were RMB 18,040-18,070/mt. Wait-and-see sentiment was strong in the market and no purchase was reported.


On Thursday, SHFE 1110 lead contract prices opened lower at RMB 16,560/mt, and then fell to RMB 16,400/mt, finding support at the 5-day moving average later the day. In the afternoon, SHFE 1110 lead contract prices generally fluctuated around the moving average, with prices finally closing at RMB 16,525/mt, up RMB 130/mt. Trading volumes decreased by 1,362 lots to 1,982 lots, and total positions decreased by 28 lots to 4,586 lots.

In spot markets, well-known brands such as Nanfang, Chihong Zn & Ge and Chengyuan were mostly quoted around RMB 16,100/mt, with discounts expanding to negative RMB 350-400/mt against SHFE 1110 lead contract prices. Other brands such as Hanjiang were quoted at RMB 16,050/mt. Traders believing prices will rise were unwilling to move goods, while downstream buying interest was also low, keeping transactions quiet. In the afternoon, steady SHFE lead prices failed to boost spot prices, with transactions still muted.


On Thursday, SHFE 1110 zinc contract prices opened lower at RMB 16,500/mt with prices moving between RMB 16,600-16,650/mt during the morning session. Boosted by the rising LME zinc prices and Shanghai Stock Exchange composite index, SHFE 1110 zinc contract prices surged to RMB 16,845/mt and fluctuated between RMB 16,700-16,800/mt in the afternoon, with prices finally closing at RMB 16,780/mt, up RMB 135/mt. Total positions decreased by 9,236 lots to 182,412 lots, while trading volumes increased by over 7,000 lots to 405,492 lost. SHFE zinc prices have continued rallying for two consecutive days, with a large number of longs leaving the market after profit-taking.

In spot markets, as SHFE three-month zinc contract prices rose in the morning, #0 zinc was traded at RMB 16,500/mt. Pushed up by SHFE zinc prices, traded prices of #0 zinc rose to RMB 16,600-16,650/mt, with some brands traded as high as RMB 16,700/mt, with discounts narrowing to negative RMB 150-180/mt against SHFE three-month zinc contract prices, even as low as negative RMB 100/mt. #1 zinc was traded between RMB 16,550-16,600/mt. Downstream buyers increased purchases due to rebounding zinc prices, while traders were holding goods, causing spot prices to rise, but with transactions quite.


Spot tin prices rose further in Shanghai on August 11th supported by rebounding LME tin prices. Mainstream trading prices during the day were between RMB 190,500-193,000/mt, main trading brands were Yunxi, Yunheng and Kaiyuan. A trading price of RMB 193,500/mt was also reported for small volumes of Yunxi branded tin. As spot tin prices showed an upward trend, hesitating purchasers gradually started purchases worrying tin prices may rose further. Market transactions were moderate, however, as a result of weak consumption. Supplies from smelters remained limited, as rebounding of tin prices was slow. Recent raw material shortages in some smelters have also dampened overall tin supply.


LME nickel for delivery in three months opened at USD 21,500/mt and closed at USD 21,120/mt on Wednesday, down by USD 130/mt from a day earlier, with the highest price at USD 22,075/mt and the lowest price at USD 20,936/mt. On Thursday, LME nickel prices fell slightly to USD 20,700/mt after opening at USD 20,968/mt. Supported by weaker US dollar, LME nickel prices advanced and hit a high of USD 21,800/mt later. During the afternoon trading hours, upward momentum of LME nickel prices waned and LME nickel prices moved in the RMB 21,500-21,700/mt range due to slower decline of the US dollar and lingering macro uncertainties. LME nickel inventories were up by 624 mt to 103,500 mt.

In the Shanghai nickel spot market, cargo-holders’ confidence was still weak, despite that LME nickel prices rebounded on Thursday. Overall trading sentiment was quiet, with cautious transactions reported. Mainstream traded prices of nickel from Russia were in the RMB 164,000-164,300/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 165,000-165,200/mt range. Deals were largely made between traders, with few downstream consumers entering market. Due to supply of NPI and scrap stainless steel which are substitutes of refined nickel, demand for refined nickel further waned during the off-seasonal high demand period. Arrival of nickel from Russia has increased, which will ease tight supply of Russian nickel in the Shanghai nickel spot market.


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