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SMM Daily Review - 2011/9/1 Base Metals
Sep 2,2011 09:42CST
price review forecast
SHFE 1111 copper contract prices, the most active one, opened up RMB 320/mt at RMB 68,510/mt on Thursday, with prices falling down after initially increasing.

SHANGHAI, Sept. 2 (SMM) –


SHFE 1111 copper contract prices, the most active one, opened up RMB 320/mt at RMB 68,510/mt on Thursday, with prices falling down after initially increasing. In the morning business, SHFE three-month copper contract prices broke the resistance of RMB 68,500/mt in the wake of the better-than-expected China’s PMI data for August released by the China Federation of Logistics and Purchasing (CFLP), reaching to an intraday high of RMB 68,690/mt. In the afternoon session, however, as LME copper prices fell to USD 9,150/mt due to a rally in the US dollar, SHFE three-month copper contract prices met resistance at the daily moving average, and dropped to a low of RMB 68,130/mt. Finally, SHFE 1111 copper contract prices closed at RMB 68,190/mt, flat with the previous day’s settlement prices. Positions for SHFE 1111 copper contracts were up 4,184 lots, and trading volumes were up 46,322 lots. Although SHFE copper prices already stood above the 5-day moving average for the week, the shorts increased sell-off pressures at high prices. With a slower rising pace of technical indicators, SHFE three-month copper contract prices failed to really break the resistance at RMB 68,500/mt.        

In spot market, copper discounts were between negative RMB 200-100/mt, as SHFE copper prices continued to rebound, and since cargo-holders voluntarily expanded discounts to promote trading. Trade prices for standard-quality copper were between RMB 68,330-68,450/mt in the morning business, and RMB 68,400-68,520/mt for high-quality copper. Daily copper supply increased significantly due to concentrated arrivals of imported copper. However, purchases were mainly made by traders due to bullish sentiment in the short term and increased discounts for speculative activity, while downstream producers stayed out of the market due to cash flow pressures. SHFE copper prices fell from highs in the afternoon session, so spot copper discounts fell. As a result, discounts for standard-quality copper were between negative RMB 150-100/mt, and negative RMB 100-50/mt for high-quality copper. Traded prices dropped to RMB 68,300-68,400/mt, but market sentiment remained cautious. 


Though LME aluminum gained again by nearly 2% overnight, most active SHFE aluminum contract opened only slightly higher at RMB 17,510/mt on Sept 1st. After hitting an intraday high of RMB 17,555/mt supported by exiting shorts, the contract erased earlier gains due to weakening Shanghai Composite Index, and finally closed RMB 10/mt or 0.06% lower at RMB 17,465/mt. Total positions of the contract dropped by 790 lots to 117,016 lots. With alleviating capital pressure, transactions during the day slightly increased, but were mainly speculative activities. SMM expects the contract to test support at RMB 17,450/mt during the following trading day.

Morning trading prices of spot aluminum in Shanghai were between RMB 17,820-17,860/mt on Sept. 1st, with premiums of RMB 50-80/mt over SHFE current-month aluminum prices. In the morning, purchases at lower prices among middlemen increased after capital pressure slightly alleviated. Upward space of spot aluminum prices was limited, however, due to disappointing SHFE aluminum prices, with spot premiums narrowing to within RMB 100/mt. Mainstream trading prices of spot aluminum in Wuxi also fell to near RMB 17,800/mt following weakening aluminum futures. Overall market transactions saw significant improvement during the day. In the afternoon, as SHFE current-month aluminum prices fell, spot quotes also dipped below RMB 17,800/mt, with premiums narrowing to near RMB 50/mt over current-month contract. Mainstream trading prices in the afternoon were between RMB 17,780-17,800/mt. Market transactions were rarely seen in the afternoon due to strong wait-and-see sentiment.


On Thursday, SHFE lead prices rose to RMB 16,990/mt after opening, meeting resistance at the RMB 17,000/mt level, and then fell to RMB 16,910-16,960/mt. In the afternoon, SHFE lead prices inched down as domestic stocks fell, finding support at the 10-day moving average, with prices finally closing at RMB 16,785/mt, down RMB 170/mt. Trading volumes decreased by 16 lots to 1,150 lots, and total positions decreased by 172 lots to 3,962 lots.

In domestic spot markets, spot discounts remained between negative RMB 450-500/mt against SHFE 1110 lead contract prices. Traded prices for well-known brands such as Nanfang and Chihong Zn & Ge were around RMB 16,500/mt, while other brands were quoted around RMB 16,400/mt. Dragged down by SHFE lead prices, well-known brands were generally quoted between RMB 16,450-16,480/mt in the afternoon. The market was cautious ahead of US non-farm employment data to be released this Friday, leaving transactions lackluster.


On Thursday, SHFE three-month zinc contract prices opened at RMB 17,355/mt, and then dropped slightly along with other base metals prices. China’s PMI for August rose to 50.9, boosting SHFE three-month zinc contract prices to rally to RMB 17,300/mt. As LME zinc prices plummeted due to the rising US dollar index, SHFE three-month zinc contract prices inched down in the afternoon to close at RMB 17,205/mt, down RMB 120/mt, or a retreat of 0.69%. Trading volumes increased by nearly 90,000 lots to 334,024 lots, while total positions decreased by 308 lots to 261,318 lots.

In domestic spot markets, #0 zinc was traded between RMB 17,000-17,050/mt, with discounts remaining between negative RMB 180-200/mt. Cargo holders held spot prices firm despite falling SHFE zinc prices at noon, with transactions below RMB 17,000/mt seldom reported. #1 zinc was traded between RMB 16,950-17,000/mt. The market was cautious due to price volatility, leaving the overall transactions muted. Spot transactions were rarely reported as SHFE zinc prices fell further in the afternoon, with discounts remaining around negative RMB 200/mt.


As tin smelters upstream failed to purchase large volumes of low-priced tin ores while LME tin prices were moving down from USD 29,000/mt to USD 22,000/mt, most of them have been holding goods on Sept. 2nd due to high raw material cost, thus leading to slightly tight supply in the market. After a three-day climb of SHFE tin prices, buying interest at downstream enterprises rose. However, traders lifted their quotes on tight supply and improved transactions. Mainstream tin brand was Nanshan in the morning, with trading prices of RMB 195,000-195,500/mt. Lvsejinnan and Jinlong joined Nanshan in the afternoon, with mainstream trading prices of 195,500-196,500/mt. Small volumes of Yunxi and Yunheng branded tin was traded at RMB 19,700/mt. Overall market transactions increased.


Wednesday, LME nickel prices opened at USD 21,805/mt and hit a low of USD 21,755/mt. Boosted by far-better-than-expected Chicago PMI for August and factory orders for July from the US, LME nickel prices surged to a high of USD 22,450/mt during the European trading hours. Later, the US dollar advanced versus the euro, pressing LME nickel prices to close at USD 22,290/mt, up by USD 380/mt from a day earlier. On Thursday, LME nickel prices advanced to USD 22,280/mt after opening at USD 22,208/mt during the Asian trading hours. Affected by slightly weak export data of PMI announced by China, the US dollar rebounded robustly. In response, LME nickel prices fell from USD 22,000/mt and currently moved around USD 21,700/mt.LME nickel inventories were 104,502 mt, up 702 mt from a day earlier.

In the Shanghai nickel spot market, traders expected that Jinchuan Group will raise ex-works nickel price due to positive performance of LME nickel price on Wednesday, so they raised offers to RMB 166,000/mt during the morning trading hours. However, traders' expectation was unmet when LME nickel prices fell all the way after opening. In response, offers in the Shanghai nickel spot market slipped and overall trading sentiment was quiet. Mainstream traded prices of nickel from Russia were in the RMB 164,500-164,000/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 165,000-164,500/mt range. Transactions waned to great extent in the afternoon trading hours.

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