SMM Daily Review – 2011/8/18 Base Metals Market

SHANGHAI, Aug. 19 (SMM)--

Copper:
SHFE 1111 copper contract prices, the most active one, opened up around RMB 300/mt at RMB 67,120/mt on Thursday. SHFE three-month copper contract prices moved lower after a high open, falling as low as RMB 66,610/mt. Till the second trading session, as LME copper prices surged, SHFE three-month copper contract prices increased, climbing to RMB 67,340/mt. In the afternoons session, SHFE three-month copper contract prices reversed earlier gains, as LME copper prices fell below USD 8,900/mt due to a rising US dollar index, and since Chinese stock markets slid 1.6%. Finally, SHFE 1111 copper contract prices closed at RMB 66,700/mt, down RMB 120/mt, or a loss of 0.18%. Positions for SHFE 1111 copper contracts were up 7,880 lots, and trading volumes were up 28,458 lots. With the struggle between the longs and shorts, speculative activities were mainly short term operation. Despite upward indicators, SHFE three-month copper contract prices were expected to fluctuate further.        

In spot markets, as SHFE copper prices earlier moved lower, copper offers were initially flat with the previous day levels, at premiums of positive RMB 100-200/mt. After the second trading session, SHFE copper prices rose by more than RMB 40/mt from the lows, prompting traders to move goods for cash generation, and dragging down copper premiums. Downstream producer’s buying interest was dampened again as SHFE copper prices increased, helping copper offers reduce to premiums of positive RMB 0-150/mt near the midday. Trade prices for standard-quality copper were between RMB 67,100-67,300/mt in the morning business, and RMB 67,150-67,450/mt for high-quality copper. Overall market transactions were less active compared to the previous trading day. SHFE copper prices dropped further in the afternoon session, and spot copper premiums expanded to positive RMB 100-150/mt. However, copper offers fell between RMB 67,100-67,250/mt, but there was still buying at low prices. 

Aluminum:    
Most active SHFE 1111 aluminum contract prices opened slightly higher at RMB 17,345/mt on August 18th, and hit an intraday high of RMB 17,430/mt in the morning with longs buying at lower prices. In the afternoon, most active SHFE aluminum contract prices fell to a lowest RMB 17,200/mt due to profit-taking caused by weak market confidence. Finally closed price was RMB 17,205/mt, down RMB 70/mt or 0.41%. Total positions of the contract only increased 468 lots as a result of short-swing trading and profit-taking. SMM expects most active SHFE 1111 aluminum contract prices to keep fluctuating above RMB 17,200/mt in the short term due to a stand-off between longs and shorts.
Mainstream trading prices of spot aluminum in Shanghai during the day were between RMB 17,780-17,820/mt, with premiums of positive RMB 160-220/mt over SHFE current-month aluminum prices. Despite rising SHFE current-month aluminum prices during spot trading hours, spot premiums narrowed to below RMB 200/mt due to sluggish purchases, and transactions were rare at above RMB 17,800/mt. In the afternoon, after SHFE current-month aluminum prices dropped by nearly 1%, spot quotes fell slightly to RMB 17,720-17,750. However, no transactions were reported as downstream buyers and middlemen exited the market due to fluctuating SHFE aluminum prices

Lead:
On Thursday, SHFE 1110 lead contract prices opened slightly higher at RMB 16,650/mt, and then fell to RMB 16,625/mt, finding support at the 5-day moving average. Later, SHFE 1110 lead contract prices rebounded to RMB 16,765/mt, and inched down to the moving average in the afternoon tracking stocks markets, with prices finally closing at RMB 16,670/mt. Trading volumes increased by 176 lots to 1,574 lots, and total positions decreased by 202 lots to 4,454 lots.

In domestic spot markets, the brand Chihong Zn & Ge was initially quoted at RMB 16,200/mt, with discounts of negative RMB 420-470/mt against SHFE 1110 lead contract prices. Since SHFE lead prices leaped by RMB 100/mt at 10:30 am, prices of Chihong Zn & Ge brand were raised to RMB 16,300/mt, with discounts remaining unchanged. Other brands such as Jinguang were generally quoted at RMB 16,150/mt. Traders increased purchases due to optimistic speculations, causing transactions to improve. The well-known brand Chihong Zn & Ge was quoted at RMB 16,250/mt in the afternoon as SHFE lead prices fell, with transactions modest, and with prices for other brands remaining unchanged.

Zinc:
On Thursday, SHFE 1111 zinc contract prices opened at RMB 16,980/mt and fell further later, but then gained momentum tracking LME zinc prices. At noon, SHFE 1111 zinc contract prices were pushed up to a intraday high at RMB 17,280/mt but then inched down in the afternoon to finally close at RMB 17,030/mt, up RMB 120/mt, above the 10-day moving average. Trading volumes increased notably by over 410,000 lots to 837,200 lots, with the turnover rate 361%, and total positions increased by 18,382 lots to 231,796 lots.

In domestic spot markets, spot zinc prices rose in tandem with SHFE three-month zinc contract prices. Traded prices of #0 zinc were between RMB 16,650-16,700/mt in the morning session, and rose to RMB 16,900-16,950/mt along with SHFE zinc prices, with discounts expanding to negative RMB 130-150/mt against SHFE 1111 zinc contract prices. #1 zinc was traded between RMB 16,850-16,900/mt. As rising prices boosted market confidence, transactions were brisk. But the market buying interest weakened in the afternoon as SHFE zinc prices fell, leaving transactions quiet.

Tin:
Continuous fluctuation of LME tin prices near USD 24,000/mt during the week also dampened goods holder confidence. Spot tin prices in Shanghai saw another slight dip on August 18th, with mainstream trading brands Yunxi, Yunheng as well as Jiangxi brands. Mainstream trading prices were RMB 195,500-198,000/mt.

Tin supplies have been kept tight during recent period as smelters are facing raw material and power supply pressures. High raw material prices have also led to certain extent of unwillingness to sell among smelters, thereby reducing market supplies. For downstream enterprises, weld tin producers generally reported lower operating rates and order volumes, indicating the conventional peak season may come later. As a result, both supply and demand have turned sluggish. Though domestic tin prices are not likely to fall supported by limited supplies and goods holder expectation of higher prices, market confidence is still stricken by seasonal low-demand and fluctuating LME tin prices. Therefore SMM expect tin prices to keep a fluctuating trend in the recent period.

Nickel:
LME nickel for delivery in three months opened at USD 21,600/mt and closed at USD 21,890/mt on Wednesday, up by USD 251/mt from a day earlier, with the highest price at USD 21,989/mt and the lowest price at USD 21,500/mt. On Thursday, LME nickel futures contract for delivery in three months fluctuated lower to hit the lowest of USD 21,657/mt after opening at USD 21,900/mt during the Asian trading hours. There was no substantial progress on negotiation between Germany and France, intensifying market concern over expansion of European debt crisis and weighing on market sentiment. LME nickel inventories were down by 162 mt to 103,092 mt.

In the Shanghai nickel spot market, transactions remained quiet. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 164,800-165,000/mt range, and mainstream traded prices of nickel from Russia were in the RMB 163,300-163,500/mt range. Overall trading sentiment was sluggish, with traders largely adopting a wait-and-see attitude. LME nickel prices still struggled below USD 22,000/mt, dampening market confidence and transactions. Few downstream consumers entered market, and deals were largely done among traders.