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Base Metal Market to Fluctuate Further Due to Capital Outflow
Aug 23,2011 11:30CST
smm insight
Source:SMM
With limited capital deposits and cautious market sentiments, base metal prices will continue to fluctuate weakly.

SHANGHAI, Aug. 23 (SMM) –Base metal prices have recently been fluctuating at low levels. On Monday, after a temporary pull in the morning business failed to bring a new round of rebound, base metal prices fell back rapidly and moved lower further, and trading volumes failed to increase significantly, suggesting cautious capital operations. With limited capital deposits and cautious market sentiments, base metal prices will continue to fluctuate weakly. 

As of August 22nd, with regard to position change on the SHFE base metal market, positions for SHFE 1111 copper contract were 169,404 lots, down 1,068 lots compared with the previous trading day. SHFE aluminum, zinc and lead also saw different degrees of capital outflow. The outlook for speculative funds in the international market is also pessimistic. According to data from the Commodity Futures Trading Commission (CFTC) during the week (August 2-9), fund managers reduced long positions by 6,807 lots to 27,568 lots, cut short positions by 1,840 lots to 21,674 lots, and slashed their net long by 4,967 lots to 5,894 lots. Data also shows that commercial traders held short positions of 72,565 lots, down 3,675 lots from the previous week.

Base metal market ceased to rebound and experienced correction again with the outflow of capital. Investors' concern over economic outlook was the key reason behind this round of correction. Market concern over the economic slowdown in the US and Europe has outweighed impacts from positive base metal import data for July from China. Meanwhile, a slower falling pace of Chinese inflationary level dispelled market expectations of the adoption of looser monetary policy, extinguishing longs sentiment. Significant growth of traded prices in currency markets indicated that liquidity was further tightening, whether the recent interest rate hike rumor is true or not. Therefore, SMM expects that SHFE base metal prices have not ended the process of consolidating, and will continue to fluctuate lower amid all kinds of negative incidents.

 

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