SMM Daily Review - 2011/8/25 Base Metals Market

SHANGHAI, Aug. 26 (SMM) –

Copper
SHFE 1111 copper contract prices, the most active one, opened slightly down RMB 20/mt at RMB 66,570/mt on Thursday. After opening, SHFE three-month copper contract prices were pushed up near RMB 67,000/mt due to position closings by shorts. Although a falling US dollar lifted LME copper prices and domestic stock markets kept rising, SHFE three-month copper contract prices still met resistance at RMB 67,000/mt, and then returned to fluctuate around the daily moving average of RMB 66,800/mt after failing to reach the price mark several times Finally, SHFE 1111 copper contract prices closed at RMB 66,790/mt, up RMB 200/mt or 0.3%. Positions for SHFE 1111 copper contracts were down 1,384 lots, while trading volumes were up 28,241 lots. SHFE three-month copper contract prices moved above the 5-day moving average on Thursday, and the longs were on the uphand, while short-term speculators were more focused on Bernanke's speech on Friday.  

In spot market, imported copper increased gradually, as cargo-holders were eager to move goods for cash generation due to the approach of the month-end In this context, copper premiums fell further to positive RMB 50-120/mt. Trade prices for standard-quality copper were between RMB 66,950-67,050/mt in the morning business, and RMB 67,000-67,100/mt for high-quality copper. The increases in low-quality copper also depressed transactions for high-quality copper to some extent, and market supply still exceeded market demand. SHFE copper prices continued to fluctuate in the afternoon session, and consumption failed to improve, forcing spot premiums to decrease further. Premiums for standard-quality copper were positive RMB 50/mt, and positive RMB 100/mt for high-quality copper. Highest traded prices still met resistance at RMB 67,000/mt, and market supply was sufficient.  

Aluminum
Most active SHFE 1111 aluminum contract opened slightly lower at RMB 17,250/mt and closed RMB 40/mt or 0.23% higher at RMB 17,320/mt on August 25th. The contract hit an intraday high of RMB 17355/mt supported by a 3% surge in Shanghai Composite Index. Market transactions slightly rose to 50,000 lots during the day, but were still less than half those in previous week. SMM expects the contract to struggle at RMB 17,300/mt in the short term given strong resistance at the 60-day moving average.

Morning mainstream trading prices of spot aluminum in Shanghai were between RMB 17,760-17,790/mt, with premiums of positive RMB 190-220/mt over SHFE current-month aluminum prices. As SHFE aluminum prices stagnated, goods holders successively lowered their quotes to attract buyers, but ended with extremely limited transactions due to month-end capital pressure at downstream enterprises. Selling interest among goods holders increased in the afternoon after SHFE current-month aluminum prices hit RMB 17,600/mt, but trading prices slightly fell to RMB 17,740-17,760/mt and transactions were also rarely reported.

Zinc
On Thursday, SHFE 1111 zinc contract prices opened lower at RMB 16,890/mt and surged in the morning session, but then fell slightly to move around RMB 17,000/mt level during the day. Total positions surged by over 40,000 lots as a large number of longs rushed to the market, pushing up SHFE three-month zinc contract prices to a intraday high of RMB 17,200/mt. At the end of trading, total positions increased by over 16,000 lots, with SHFE three-month zinc contract prices rolling back previous gains to close at RMB 17,085/mt, up RMB 165/mt, or up 0.98%. Transactions improved with trading volumes increasing by 250,000 lots to 565,640 lots, and total positions increased by 30,094 lots to 290,738 lots.

In domestic spot markets, #0 zinc was traded between RMB 16,850-16,900/mt in the morning session, and then was traded between RMB 16,800-16,850/mt as SHFE zinc prices fell, with transactions mainly made at the high end, and with discounts below negative RMB 100/mt against SHFE 1110 zinc contract prices. #1 zinc was traded between RMB 16,750-16,800/mt. Downstream buying interest was low as they were uncertain of price trends. Discounts against SHFE 1110 zinc contract prices extended to negative RMB 150-180/mt along with rising SHFE zinc prices, driving up spot offers to RMB 16,950/mt, and causing some downstream buyers to increase purchase. But the overall transactions did not expand notably.

Lead
On Thursday, SHFE 1110 lead contract prices opened slightly higher at RMB 16,725/mt and soon dipped to RMB 16,685/mt, with prices fluctuating between RMB 16,720-16,770/mt later the day. At the end of trading, SHFE 1110 lead contract prices found support at RMB 16,750/mt, and finally closed at RMB 16,780/mt, up RMB 90/mt. Trading volumes increased by 160 lots to 964 lots, while total positions decreased by 114 lots to 4,168 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted around RMB 16,300/mt, with discounts of negative RMB 400-450/mt against SHFE 1110 lead contract prices. Other brands such as Jinli and Hanjiang were quoted around RMB 16,250/mt. The market was cautious due to the pending QE3 by the US Fed, keeping transactions muted. As SHFE lead prices rose in the afternoon, spot lead prices were lifted by RMB 50/mt, but with downstream buying interest low.

Tin
Spot tin prices were little changed in Shanghai on August 25th, with mainstream Yunxi, Yunheng, Guangsheng and Lvsexinan etc. branded tin mainly traded between RMB 193,500-195,500/mt. Market transactions remained sluggish as downstream consumption was weak. Tin import was reported recently, but mainly imported by smelters and downstream consumers, therefore the amount of imported tin was limited in the tin market. The price gap between domestic and import tin is also leading to more tin imports, which will weigh on domestic tin consumption. With LME tin prices keep fluctuating, SMM believes tin futures prices are not likely to rise and may move downward slightly.

Nickel
LME nickel for delivery in three months opened at USD 20,875/mt and closed at USD 20,850/mt on Wednesday, up by USD 100/mt from a day earlier, with the highest price at USD 21,061/mt and the lowest price at USD 20,500/mt. Supported by weaker US dollar, LME nickel futures contract for delivery in three months fluctuated around 5-day moving average after opening at USD 20,850/mt during the Asian trading hours on Thursday. Market sentiment remained cautious before Friday's Fed meeting. LME nickel inventories were up by 84 mt to 104,010 mt.

In the Shanghai nickel spot market, traded prices remained stable from a day earlier. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 159,000-159,500/mt range, and mainstream traded prices of nickel from Russia were in the RMB 158,000-158,500/mt range. LME nickel prices failed to make any breakthrough, dampening trading sentiment in spot market. Overall trading sentiment was soft, with cautious transactions from traders and quiet demand from downstream consumers. Deals were largely done among traders. A large amount nickel from Russia has arrived in the Shanghai nickel spot market recently, so supply of goods was ample in the market. Coupled with soft demand, spot nickel prices were more sluggish.