SMM Daily Review – 2011/8/17 Base Metals Market

SHANGHAI, Aug. 18 (SMM)--

Copper:
SHFE 1111 copper contract prices opened down RMB 320/mt at RMB 66,430/mt on Wednesday. As LME copper prices moved higher due to a falling US dollar index, SHFE three-month copper contract prices moved upward after the opening. The longs entered into the market, but due to weak domestic stock markets and the resistance at the 5-day moving average of RMB 66,750/mt, the shorts increased sell-off pressures at around RMB 67,000/mt. In this context, SHFE three-month copper contract prices met pressure at Tuesday's settlement prices RMB 66,750/mt before the midday, and widely fluctuated around the price mark. In the afternoon session, SHFE three-month copper contract prices jumped above RMB 67,000/mt after LME copper prices increased above USD 8,900/mt, reaching as high as RMB 67,130/mt. Due to withdrawal of speculative funds, the most actively-traded copper contract prices closed at RMB 66,800/mt, up RMB 50/mt or a gain of 0.07%. Positions and trading volumes for the most actively-traded copper contracts were up 7,692 lots and 29,606 lots, respectively, while positions for SHFE 1110 copper contracts were significantly down 15,558 lots. Investors made intraday operation since they were unsure about future copper prices. With growing risks, SHFE three-month copper contract prices were expected to fluctuate further.   

In spot markets, spot copper offers couldn't follow wild changes in SHFE copper prices, with offers quoted at premiums of positive RMB 100-200/mt. Trade prices for standard-quality copper were between RMB 66,900-67,000/mt in the morning business, and RMB 67,000-67,150/mt for high-quality copper. Offers from cargo-holders were firm due to impossible hedge trading, while downstream producer's buying interest weakened further due to unstable SHFE copper prices and uncertainty in future prices, resulting in a significant drop in market transactions. SHFE copper prices were pushed up in the afternoon session, but copper supply was still limited, keeping high-quality copper offers firm at premiums of positive RMB 120-150/mt. Traded prices were little changed from the morning business, and market transactions remained weak.  

Aluminum:    
Most active SHFE 1111 aluminum contract prices opened lower at RMB 17,190/mt on August 17th, and quickly climbed to an intraday high of RMB 17,345/mt before meeting resistance at the 60-day moving average caused by sluggish transactions and exiting capital. Finally closed price was RMB 17,310/mt, up RMB 70/mt or 0.41%, and positions of the contract fell by 3,218 lots. SMM expects most active SHFE 1111 aluminum contract prices to keep fluctuating at RMB 17,300/mt in the short term, given strong support at RMB 17,200/mt and continuously exiting longs.
Mainstream trading prices of spot aluminum in Shanghai on August 17th were between RMB 17,780-17,820/mt, with premiums of positive RMB 220-250/mt over SHFE current-month aluminum prices. After SHFE current-month aluminum prices slightly rebounded after opening lower, spot premiums also climbed, with strong selling interest among goods holders at RMB 17,800/mt. However, mainstream trading prices gradually moved down due to cautious sentiment among buyers. As a result, transactions were scarce at higher prices, and supplies were scarce at lower prices. SHFE current-month aluminum prices kept fluctuating in the afternoon, and spot quotes were stayed at RMB 17,780-17,800/mt. Overall market transactions were rare as consumers took a wait-and-see attitude.

Lead:
On Wednesday, SHFE lead prices opened lower at RMB 16,455/mt, and then rose further to RMB 16,600/mt, with prices moving between RMB 16,630-16,670/mt. In the afternoon, SHFE lead prices edged up to RMB 16,695/mt in tandem with rising LME lead prices, and finally closed at RMB 16,655/mt, up RMB 205/mt, or up 1.25%. Trading volumes decreased by 842 lots to 478 lots, and total positions decreased by 112 lots to 4,802 lots.

In domestic spot markets, as SHFE lead prices opened lower but edged up later, well-known brand Chihong Zn & Ge was generally quoted at RMB 16,250/mt, with discounts of negative RMB 350-400/mt against SHFE 1110 lead contract prices, but with traded prices concentrating at RMB 16,200/mt. Other brands such as Hanjiang and Shuikoushan were quoted between RMB 16,150-16,200/mt. As SHFE lead prices were steady in the afternoon, well-known brands such as Chihong Zn & Ge and Nanfang were traded at RMB 16,250/mt, with traded for other brands remaining unchanged. As downstream buyers were cautious due to price volatility, the overall transactions were quiet.

Zinc:
On Wednesday, SHFE three-month zinc contract prices opened higher and surged but met resistance at RMB 17,000/mt, with prices generally moving between RMB 16,800-16,900/mt during the day. A large number of shorts left the market with profit-taking, pushing up SHFE three-month zinc contract prices to break through RMB 17,000/mt. Finally, SHFE three-month zinc contract prices closed at RMB 16,975/mt, up RMB 160/mt. Trading volumes decreased by over 40,000 lots to 420,088 lots, and total positions decreased by 28,042 lots to 213,414 lots.

In spot markets, as SHFE three-month zinc contract prices surged after opening, spot zinc prices rose in response. #0 zinc was traded between RMB 16,650-16,700/mt, with discounts of negative RMB 200/mt against SHFE 1111 zinc contract prices, and with transactions generally made at the high end. #1 zinc was traded between RMB 16,600-16,650/mt. Downstream buyers took a wait-and-see sentiment at fluctuating zinc prices, while traders were also cautious as discounts remained at low levels, keeping the overall transactions muted.

Tin:
Mainstream trading prices of spot tin in Shanghai slightly fell on August 17th, with Yunxi, Yunheng, Nanshan and Kaiyuan trading at RMB 196,000-198,000/mt and small volumes of Yunxi branded low-lead tin trading at RMB 198,500/mt. Market transactions turned even more sluggish during the day after LME tin price fell further to dampen buying interest. Tin supplies remained tight, but no shortage was reported due to weak consumption. Given sluggish world economies, power restrictions and tight capital supply etc., most market players expect the conventional peak season to come later this year.

Nickel:
LME nickel for delivery in three months opened at USD 21,500/mt and closed at USD 21,639/mt on Tuesday, up by USD 179/mt from a day earlier, with the highest price at USD 21,725/mt and the lowest price at USD 21,235/mt. On Wednesday, LME nickel prices fluctuated narrowly after opening at USD 21,600/mt during the Asian trading hours. Supported by weak US dollar, LME nickel prices did not fall further, but were still weighed between 5-day and 10-day moving averages. Market movement was stalled before final outcome of negotiation between Germany and France concerning the European debt crisis. LME nickel inventories were down by 24 mt to 103,254 mt.
In the Shanghai nickel spot market, transactions were even quieter, as narrow fluctuation of LME nickel prices dampened cargo-holders’ trading sentiment. Mainstream traded prices of nickel from Russia were in the RMB 163,000-163,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 164,500-164,800/mt range. Downstream demand was stable, and deals were largely made among traders. It is reported that demand did not shown any sign of recovery. Price spread between Jinchuan nickel and Russian nickel expanded to certain extent, which is mainly due to arrival of a large amount of Russian nickel from improved domestic/LME nickel price ratio. In this context, Russian nickel holders were eager to generate cash, and lowered prices, leaving price gap between Russian nickel and Jinchuan nickel wider

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.