SMM Daily Review – 2011/8/16 Base Metals Market

SHANGHAI, Aug. 17 (SMM)--

Copper:
SHFE 1110 copper contract prices, the most active one, opened slightly up RMB 20/mt at RMB 67,300/mt on Tuesday. Due to a stable US dollar, LME copper prices fell below USD 8,900/mt after profit-taking, and SHFE three-month copper contract prices fell rapidly after opening higher. Later, domestic stock markets moved lower, weighing on SHFE three-month copper contract prices, which dropped below the 5-day moving average before the midday due to a sell-off by the shorts. SHFE 1110 copper contract prices were on a falling track during the whole trading day, with an intraday low at RMB 66,360/mt and finally ending at RMB 66,510/mt, down RMB 830/mt or 1.23%. Positions and trading volumes for SHFE 1110 copper contracts were down 3,828 lots and 26,720 lots, respectively, while positions and trading volumes for SHFE 1111 copper contracts were up 19,570 lots and 66,484 lots, respectively, suggesting the completion of the shift of the most actively-traded copper contracts. SHFE three-month copper contract prices were expected to test the 5-day moving average.     

In spot markets, As SHFE copper prices fell back and prices below RMB 67,000/mt attracted downstream producers to make purchases, cargo-holders were reluctant to move goods and push up initial premiums to positive RMB 60-120/mt. Later, since SHFE copper prices continued to fall, copper premiums expanded further to positive RMB 80-200/mt near the midday. Trade prices for standard-quality copper were between RMB 66,850-66,950/mt in the morning business, and RMB 66,950-67,200/mt for high-quality copper. Copper premiums for high-quality copper expanded rapidly due to welcomed consumption, but standard-quality imported copper failed to increase premiums, resulting in bigger price gap between the two. Market transactions were relatively brisk as downstream producers actively participated in the market. Copper prices on the SHFE market continued to fall, and higher copper premiums damped trader’s buying interest. As a result, market transactions were not as brisk as the morning session. Spot copper premiums failed to increase significantly, but were reported between positive RMB 120-220/mt. Traded prices dropped between RMB 66,750-67,000/mt, and markets showed wait-and-see sentiment.  

Aluminum:    
Most active SHFE 1111 aluminum contract prices opened lower at RMB 17,340/mt on August 16th. During the trading day, strong short momentum forced long capital to exit with positions falling by 4,218 lots following previous increase. Mainstream trading prices also fell below the 60-day moving average and finally closed at RMB 17,150/mt, down RMB 260/mt or 1.49%. SHFE aluminum prices fell for a third consecutive day with a technical falling to fill previous gaps. Given inadequate confidence, upward resistance is expected to be stronger, and SMM expect most active SHFE aluminum contract to lower its bottom price and test RMB 17,000/mt.

Trading prices of spot aluminum in Shanghai on August 16th were between RMB 17,730-17,760/mt, with premiums of positive RMB 200-240/mt over SHFE current-month aluminum prices. SHFE current-month aluminum contract changed to 1109 during the day. Most active SHFE 1111 aluminum contract prices opened lower and was followed by an over 1% loss, spot prices also followed to fall. However, as goods holders were unwilling to sell goods at low prices, spot premiums again surged to above RMB 200/mt.Market transactions were limited due to cautious sentiment among purchasers. SHFE current-month aluminum price fluctuated at RMB 17,500/mt in the afternoon, and spot quotes were also steady between RMB 17,730-17,750/mt. However, market transactions were rare due to scarce purchases and inquiries.

Lead:
On Tuesday, SHFE 1110 lead contract prices opened slightly higher at RMB 16,835/mt, and then plummeted to RMB 16,580/mt on speculations over interest rates hike, fluctuating between RMB 16,540-16,600/mt. In the afternoon, SHFE inched down along with LME lead prices, and finally closed at RMB 16,450/mt, down RMB 280/mt, or down 1.67%. Trading volumes increased slightly by 272 lots to 1,320 lots, and total positions increased by 182 lots to 4,914 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were generally quoted based on SHFE lead prices in the morning session, with discounts of negative RMB 400/mt against SHFE 1110 lead contract prices, with traded prices concentrating between RMB 16,200-16,250/mt. Other brands such as Jinguan were quoted at RMB 16,100/mt. As SHFE lead prices fell further in the afternoon, offers for Chihong Zn & Ge and Nanfang were down to RMB 16,100-16,150/mt, while other brands were quoted between RMB 16,050-16,080/mt. Market players especially downstream buyers were cautious due to fluctuating lead prices, who were generally enquiring. Smelters reduced goods supply due to optimistic speculations, causing spot lead supply available in the market to fall. But smelters will increase goods supply to generate cash once lead prices fall below RMB 16,000/mt.

Zinc:
On Tuesday, SHFE three-month zinc contract prices opened above RMB 17,000/mt, then plunged below RMB 17,000/mt in the morning session on speculation that China’s central bank will raise interest rates, with prices moving between RMB 16,700-16,800/mt in the afternoon. At the end of trading, SHFE three-month zinc contract prices closed the day with declines at RMB 16,600/mt, down RMB 585/mt, or down 3.4%. Total positions increased by 61,892 lots to 241,456 lots, and trading volumes increased by 280,000 lots to 184,442 lots, with short momentum stronger.

In domestic spot markets, as SHFE three-month zinc contract prices fell below RMB 17,000/mt after opening, traded prices of #0 zinc dropped to RMB 16,600/mt, down from RMB 16,700/mt, with discounts remaining at negative RMB 200/mt against SHFE 1111 zinc contract prices. #1 zinc was traded between RMB 16,550-16,600/mt. The market was cautious at fluctuating zinc prices, leaving transactions quiet. Market confidence was depressed as SHFE zinc prices fell in the afternoon.

Tin:
Spot tin prices in Shanghai failed to rise further after climbing to RMB 198,000/mt on August 16th. Though quotes at RMB 199,000/mt were heard in the morning, transactions were rarely reported. In the afternoon, spot tin prices began to dip due to sluggish transactions. Some tin supplies from Jiangxi were seen in the market, but with relatively high trading prices. Yunxi, Yunheng, Nanshan and Kaiyuan branded tin was mainly traded between RMB 196,500-198,000/mt, overall market transactions remained sluggish as downstream buyers purchased on an as-needed basis and factory orders remain unimproved due to seasonal low-demand. Spot supplies remained tight, which provided certain support for tin prices.

Nickel:
LME nickel for delivery in three months opened at USD 21,600/mt and closed at USD 21,460/mt on Monday, down by USD 43/mt from a day earlier, with the highest price at USD 21,850/mt and the lowest price at USD 21,276/mt. LME nickel prices advanced slightly to USD 21,600/mt after opening at USD 21,500/mt on Tuesday. In the afternoon trading hours, LME nickel prices fell to certain extent, due to investors’ concern over the US industrial data to be released on Tuesday night and over uncertainties of a meeting between Germany and France. In addition, stronger US dollar index also weighed on base metal prices. SMM expects that LME nickel prices will receive support at USD 21,235/mt.  LME nickel inventories were up by 6 mt to 103,278 mt.

In the Shanghai nickel spot market, narrow fluctuation in LME nickel prices dampened traders’ trading interest, leaving quiet trading sentiment in the spot market. Mainstream traded prices of nickel from Russia were in the RMB 163,500-164,000/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 164,500-165,000/mt range. Transactions were largely made during the morning trading hours, as trading sentiment was dampened when LME nickel prices slipped during the afternoon trading hours. Generally speaking, narrowly fluctuation in LME nickel prices fueled traders’ wait-and-see sentiment, and lackluster demand from downstream consumers failed to support spot transactions. Recent domestic/LME nickel price ratio has been favorable for imports, allowing some Russian nickel to enter Shanghai nickel spot market. In this context, supply of spot nickel was relatively ample in the market.