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SMM Daily Review - 2011/8/26 Base Metals
Aug 29,2011 10:28CST
price review forecast
As LME copper prices surged on the previous trading day, SHFE 1111 copper contract prices, the most active one, opened up RMB 500/mt at RMB 67,300/mt on Friday.

SHANGHAI, Aug. 29 (SMM) –


As LME copper prices surged on the previous trading day, SHFE 1111 copper contract prices, the most active one, opened up RMB 500/mt at RMB 67,300/mt on Friday. After opening, SHFE three-month copper contract prices narrowly fluctuated around the daily moving average, and met resistance during major trading hours. As a result, SHFE three-month copper contract prices fell below RMB 67,000/mt, falling to a low RMB 66,820/mt. In the afternoon session, as LME copper prices tried to move toward USD 9,000/mt due to a slump in the US dollar, SHFE three-month copper contract prices touched an intraday high of RMB 67,570/mt. Finally, SHFE 1111 copper contract prices closed at RMB 67,440/mt, up RMB 640/mt or a gain of 0.96%. Positions for SHFE 1111 copper contracts were down 3,604 lots, while trading volumes were up 41,492 lots. Despite a high close, SHFE three-month copper contract prices were expected to fluctuate further, as long investors were awaiting the Fed chairman Ben Bernanke’s speech at the central bank's symposium on Friday evening.

In spot markets, copper premiums declined to positive RMB 0-120/mt, as imported copper increased, although SHFE copper prices fell from highs. Trade prices for standard-quality copper were between RMB 67,050-67,200/mt in the morning business, and RMB 67,100-67,300/mt for high-quality copper. Some speculators participated in the market due to short-term bets on QE3 in the US and low premiums, and transactions were mainly made at low prices. As a result, market oversupply remained. SHFE copper prices regained momentum, and copper premiums dropped again. In this context, offers for standard-quality copper experienced discounts levels, while offers for high-quality copper were only premiums of positive RMB 0/mt. Traded prices increased to RMB 67,100-67,350/mt, depressing buying interest, and resulting in limited market transactions. Copper inventories monitored by the Shanghai Future Exchange (SHFE) were down 9,756 mt to 102,258 mt in the week ended August 26th. Downstream producers made purchases on an as-needed basis, but increased purchasing volumes. Due to the approach of the month-end, cargo-holders were more eager to move goods, keeping market oversupply available. Spot copper offers remained discounts levels, and downstream producers were still confronted with tight cash flows.


Most active SHFE 1111 aluminum contract opened slightly higher at RMB 17,330/mt on August 26th. After meeting temporary strong resistance, the contract broke through the 60-day moving average with increased buying, hitting an intraday high of RMB 17,445/mt. The contract finally closed RMB 80/mt or 0.46% higher at RMB 17,380/mt after partially erasing earlier gains due to profit-taking. Though most active SHFE aluminum contract finally broke through the 60-day moving average and hit a week high with improved investor risk appetite, SMM expect it to test RMB 17,450/mt in the short term given cautious market sentiment, and may slightly go up if US Fed president announces economic stimulation policies. Latest SHFE aluminum inventories continued to fell by 15,885 mt to 124,808 mt, and positive fundamentals will continuously help aluminum prices gather upward momentum.

Trading prices of spot aluminum in Shanghai on August 26th were between 17,780-17,820/mt, with premiums of positive RMB 150-170/mt over SHFE current-month aluminum prices. SHFE aluminum prices climbed in the morning session, but partially erased earlier gains during spot trading hours due to profit-taking. This, however, still boosted goods holder confidence with spot quotes being lifted. While on the contrary, due to month-end capital pressure, some goods holders lowered their quotes in order to attract buyers. Market transactions were rarely seen as consumption remained weak, with spot aluminum prices struggling at RMB 17,800/mt. In the afternoon, though SHFE current-month aluminum prices narrowly fluctuated, spot quotes rose to RMB 17,800-17,820/mt due to unwillingness to sell among goods holders. However, transactions were rare with the approaching weekend.


Last Friday, SHFE 1110 lead contract prices opened slightly higher at RMB 16,855/mt, and plummeted to RMB 16,720/mt as of 10:00 am due to pending announcement of QE3. At the end of trading, SHFE 1110 lead contract prices rallied to close at RMB 16,760/mt, down RMB 20/mt. Trading volumes decreased by 314 lots to 650 lots, and total positions decreased by 36 lots to 4,132 lots.

In domestic spot markets, well-known brands such as Nanfang, Chihong Zn & Ge and Shuangyan were quoted between RMB 16,250-16,300/mt, with discounts expanding to negative RMB 450-500/mt against SHFE 1110 lead contract prices. Unknown brands were rarely found in the market. A large number of traders purchased the Shuangyan brand at RMB 16,250/mt, with transactions quiet ahead of the weekend.


Last Friday, SHFE 1111 zinc contract prices opened higher at RMB 17,155/mt in the morning session, tracking LME zinc prices overnight, and plunged to RMB 16,950/mt at noon along with falling LME zinc prices. As a large number of shorts left the market with profit-taking, SHFE three-month zinc contract prices gained back previous losses to close at RMB 17,090/mt, up RMB 30/mt. Trading volumes decreased by 150,000 lots to 414,012 lots, and total positions decreased by 10,144 lots to 280,594 lots.

In domestic spot markets, #0 zinc was traded between RMB 16,850-16,900/mt in the morning session before SHFE zinc prices fell, with spot discounts narrowing to negative RMB 70-80/mt against SHFE 1110 zinc contract prices along with falling SHFE zinc prices. Spot prices were firm between RMB 16,800-16,820/mt. #1 zinc was traded between RMB 16,750-16,780/mt. Downstream buying interest was low ahead of the weekend and due to falling SHFE zinc prices, leaving transactions quiet. Offers rose to RMB 16,850-16,900/mt in the afternoon, pushed up by SHFE zinc prices, but transactions were quiet.


Spot tin prices in Shanghai fell slightly on August 26th as a combined result of stagnating LME tin prices overnight, inflow of imported tin and weak consumption, with mainstream Yunxi, Yunheng, Nanshan and Kaiyuan etc. branded tin mainly trading at RMB 192,500-195,000/mt. Transactions remained sluggish during the day.


Last Thursday, LME nickel prices opened at USD 20,850/mt and closed at USD 21,020/mt, up by USD 170/mt from a day earlier, with the highest price at USD 21,295/mt, and the lowest price at USD 20,849/mt. On last Friday, LME nickel prices fluctuated widely after opening at USD 21,169/mt during the Asian trading hours, and then fluctuated narrowly waiting for guidance from Ben Bernnake’s statement. The US dollar fluctuated weakly around 74, lending support for base metal prices. At around 6:00 pm, LME nickel prices rallied to USD 21,170/mt, up by USD 127/mt. LME nickel inventories were 105,018 mt, up by 1,008 mt from a day earlier.

In the Shanghai nickel spot market, prices were stable from a day earlier. Mainstream traded prices of nickel from Russia were in the RMB 158,000-158,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 159,000-159,500/mt range. Stronger LME nickel prices supported spot nickel prices to certain extent, with moderate trading sentiment reported. Deals were largely made among traders, and downstream demand was still soft. Ample supply of goods in the market will dampen upward momentum of spot nickel prices.


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