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SMM Daily Review - 2011/8/23 Base Metals Market
Aug 24,2011 10:00CST
price review forecast
SHFE 1111 copper contract prices, the most active one, opened down RMB 140/mt at RMB 66,370/mt, and SHFE 1111 aluminum contract prices opened at RMB 17,235/mt.

SHANGHAI, Aug. 24 (SMM) –

SHFE 1111 copper contract prices, the most active one, opened down RMB 140/mt at RMB 66,370/mt on Tuesday. After opening, SHFE three-month copper contract prices returned to fluctuate near the daily moving average after briefly falling to RMB 66,060/mt. Later, HSBC’s China PMI was announced, and was better than the previous figure, pushing up SHFE three-month copper prices. However, due to a lack of more buying force, SHFE three-month copper contract prices temporarily met resistance after touching the 5-day moving average of RMB 66,490/mt, and then narrowly fluctuated around the daily moving average. In the afternoon session, as domestic stock markets increased more than 1.5% after initially falling down, and since LME copper prices rallied to USD 8,850/mt when the US dollar index fell below 74 points, SHFE three-month copper contract prices gradually moved higher from support at the daily moving average, and then reversed earlier declines, with an intraday high at RMB 66,700/mt. Finally, SHFE 1111 copper contract prices closed at RMB 66,650/mt, up RMB 140/mt or 0.21%. Positions for SHFE 1111 copper contracts were down 2,696 lots, and trading volumes were down 36,732 lots. Despite advantages of the longs, SHFE three-month copper contract prices were expected to fluctuate in the short term due to strong resistance at the 10-day moving average.        

In spot market, SHFE copper prices reached high temporarily in the morning business, but copper offers held firm and were flat with the previous trading day levels, reporting at premiums of positive RMB 100-170/mt. During the second trading session, as traders were forced to move goods because of long-term contracts which were due before the month-end, market supply became sufficient. As a result, spot copper premiums fell to positive RMB 70-150/mt. Trade prices for standard-quality copper were between RMB 66,550-66,650/mt in the morning business, and RMB 66,600-66,750/mt for high-quality copper. As bullish sentiment gradually weakened, downstream producer’s buying interest was dampened, keeping market transactions muted. SHFE copper prices increased slightly in the afternoon session, but consumption failed to recover. In this context, cargo-holders showed more unwillingness to sell goods, reducing copper supply slightly, and keeping copper premiums firm. Premiums for high-quality copper were at positive RMB 100-160/mt. Traded prices were nearly unchanged from the morning session levels, and market transactions were somehow in a stalemate.

Most active SHFE 1111 aluminum contract prices opened at previous day closing price of RMB 17,235/mt on August 23rd, and closed at RMB 17,290/mt, up RMB 55/mt or 0.32% from previous trading day. Highest and lowest prices during the day were RMB 17,315/mt and RMB 17,190/mt. Though aluminum became the only base metal that gained in SHFE, its upward momentum is still lacked. SMM expects most active SHFE aluminum contract to keep fluctuating near RMB 17,250/mt in the short term due to low market sentiment.

Mainstream trading prices of spot aluminum in Shanghai were RMB 17,770-17,800/mt in the morning, with premiums of positive RMB 230-250/mt over SHFE current-month aluminum prices. Quotes of goods holders were firm in the morning backed by stable movements of SHFE aluminum prices, but several traders lowered their quotes to RMB 17,770/mt to promote transactions. However, transactions remained sluggish due to low buying interest among both downstream buyers and middlemen. In the afternoon, despite a slight gain of SHFE aluminum, mainstream trading prices of spot aluminum lowered to RMB 17,760-17,770/mt due to weak consumption. Market transactions were rarely reported as cargo holders were unwilling to sell.

On Tuesday, SHFE 1111 zinc contract prices opened lower at RMB 16,875/mt and plummeted to RMB 16,705/mt. HSBC PMI for August was 49.8, better than forecasts, boosting the Shanghai Stock Exchange composite index. As a result, SHFE 1111 zinc contract prices rallied to the moving average, fluctuating between RMB 16,800-16,850/mt during the day. At the end of trading, SHFE 1111 zinc contract prices closed at RMB 16,915/mt, down RMB 45/mt. Trading volumes decreased by nearly 10,000 lots to 461,226 lots, while total positions increased by 3,118 lots to 259,720 lots, with the short momentum still stronger.

In domestic spot markets, spot zinc prices fell in tandem with SHFE zinc prices, with discounts further contracting. #0 zinc was traded between RMB 16,700-16,750/mt, with discounts of negative RMB 150/mt against SHFE 1111 zinc contract prices, and #1 zinc was traded between RMB 16,650-16,700/mt. Cargo holders were unwilling to move goods, keeping transactions muted. As SHFE zinc prices rose at the end of trading, downstream buying interest improved, with traded prices between RMB 16,750-16,800/mt.

On Tuesday, SHFE 1110 lead contract prices opened slightly lower at RMB 16,550/mt, and surged to RMB 16,665/mt. The preliminary HSBC PMI was slightly higher than July’s level at 49.8, but still showed a disappointing economic condition, weighing down SHFE lead prices to fluctuate around the moving average, with prices rallying to close at RMB 16,650/mt, up RMB 80/mt. Trading volumes decreased by 566 lots to 702 lots, while total positions increased by 88 lots to 4,328 lots.

In domestic spot markets, Brands such as Chihong Zn & Ge, Nanfang and Chengyuan were mostly quoted between RMB 16,200-16,230/mt, with discounts of negative RMB 400/mt against SHFE 1110 lead contract prices. Other brands such as Tianma and Shuangyan were quoted between RMB 16,120-16,130/mt. Transactions of well-known brands were quiet due to higher prices, but transactions for other brands improved. SHFE lead prices fell in the afternoon, with prices of well-known brands down to RMB 16,170/mt. But there were traders reporting prices of well-know brands rallied to RMB 16,200/mt along with SHFE lead prices, while prices of other brands remained relatively unchanged, and with transactions muted.

Transactions in Shanghai tin market were extremely sluggish on August 23rd. As the market is still tortured by tensions overseas, the more than RMB 10,000 price gap over domestic prices also forced domestic market players to keep their nerves tight all the time. Upstream enterprises sold goods with market prices and downstream consumers only provided rare purchases, thereby reducing operation space for traders and forcing them to keep low inventories. Market transactions fell behind those of yesterday. However, tin prices narrowed losses during the day, with Nanshan, Kaiyuan, Yuecheng branded tin trading near RMB 193,000/mt and Yunxi and Yunheng branded tin at RMB 193,500-195,000/mt. Transactions at higher prices were rare. The market is still waiting for directions.

On Monday, LME nickel for delivery in three months opened at USD 21,200/mt and closed at USD 20,777/mt, down by USD 433/mt from a day earlier, with the highest price at USD 21,366/mt and the lowest price at USD 20,760/mt. On Tuesday, boosted by better-than-expected HSBC PMI from China, LME nickel prices advanced to USD 21,177/mt after opening at USD 20,900/mt during the Asian trading hours. However, LME nickel pries fluctuated around USD 21,000/mt during the European trading hours as market sentiment was cautious before release of economic data from Germany and France. LME nickel inventories were down by 96 mt to 103,266 mt.

Consumption was still quiet in the Shanghai nickel spot market and players' confidence was fragile towards LME nickel price outlook. Offers of Jinchuan nickel were already than ex-works Jinchuan nickel prices, leaving limited transactions among traders. Traded prices of nickel from Jinchuan Group were in the RMB 160,500-160,700/mt range. Transactions of nickel from Russia were relatively brisk, with traded prices between RMB 159,500-159,700/mt. Due to strong bearish sentiment towards LME nickel price, cargo-holders’ confidence was faltered.


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