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SMM Daily Review - 2011/9/2 Base Metals Market
Sep 5,2011 09:56CST
price review forecast
SHFE 1111 copper contract prices, the most active one, opened down RMB 210/mt at RMB 68,200/mt on Friday.

SHANGHAI, Sept. 5 (SMM) --
SHFE 1111 copper contract prices, the most active one, opened down RMB 210/mt at RMB 68,200/mt on Friday. After opening, SHFE three-month copper contract prices gradually moved lower and touched a low at RMB 67,640/mt, as LME copper prices met resistance near USD 9,100/mt, and since Chinese stock markets fell by more than 1% and the longs reduced holdings of position. In the afternoon session, as LME copper prices rallied, and since short-term shorts made position closings due to profit-taking after the declines in Chinese stock markets slowed down, SHFE three-month copper contract prices slightly rebounded to RMB 67,800/mt, narrowing the daily declines. Finally, SHFE 1111 copper contract prices closed at RMB 67,830/mt, down RMB 580/mt or 0.85%. Positions for SHFE 1111 copper contracts were down 3,208 lots, and trading volumes were down 25,656 lots. Both the longs and shorts were cautious before the release of the US employment data, and whether or not SHFE three-month copper contract prices could be well supported the 5-day moving average would depend on the guidance of LME copper prices on Friday night. 

In spot market, as SHFE copper prices moved lower after a low open in the morning business, copper discounts narrowed between discounts of negative RMB 30/mt and premiums of positive RMB 30/mt. Trade prices for standard-quality copper were between RMB 67,950-68,030/mt in the morning business, and RMB 68,000-68,150/mt for high-quality copper. Due to optimistic expectations, cargo-holders were unwilling to make transactions at discounts, reducing market supply. Downstream producers took advantage of a drop in SHFE copper prices to make more purchases. SHFE copper prices stopped falling in the afternoon session, but low prices of goods sources were rarely seen in the market. As a result, cargo-holders of spot copper refused to offer discounts, helping price offers turning into premiums. Standard-quality copper offers were between premiums of positive RMB 0-50/mt, and high-quality copper offers were between premiums of positive RMB 50-80/mt. Traded prices tried to hold RMB 68,000/mt, but fell between RMB 67,900 -68,050/mt. Traders were the main participants in consumption and actively made purchases due to optimistic expectations towards future prices, helping improve the overall trading sentiment. Copper inventories monitored by the SHFE were up 5,532 mt to 107,790 mt in the week ended September 2nd, showing the characteristic of increasing imported copper.   

Most active SHFE 1111 aluminum contract opened slightly lower at RMB 17,465/mt on September 2nd. After erasing weekly gains to RMB 17,370/mt due to profit-taking by the longs and short-selling, the contract partially pared losses at the tail of trading on profit-taking among the shorts, and finally closed at RMB 17,435/mt, down RMB 50/mt or 0.29%. Total positions of the contract rose by 1,006 lots to 118,022 lots. Though power shortages in south China provided extra support for SHFE aluminum among all SHFE metals, a generally bearish market sentiment and only around 20,000 lots of transactions still dragged the metal down from weekly high. SMM expects most active SHFE aluminum contract to struggle at RMB 17,450/mt in the short term while waiting for the US non-farm payroll data to determine market direction.

Trading prices of spot aluminum in Shanghai were between RMB 17,780-17,820/mt on September 2nd, with premiums of positive RMB 40-80/mt over SHFE current-month aluminum prices. Spot market sentiment turned low with SHFE aluminum prices’ opening and moving lower. Transactions were hardly reported despite of inquiries. As only small volumes of downstream purchases were seen in the market, with sufficient supply, goods holders were lowered quotes to attract buyers, thereby dragging down mainstream trading prices to below RMB 17,800/mt. Overall market transactions were sparse. In the afternoon, following rebound of SHFE aluminum prices, a few middlemen purchased at lower prices, but supplies from goods holders were rare. Spot quotes in the afternoon were mainly between RMB 17,780-17,800/mt. Market transactions were scarce due to low market sentiment.

Last Friday, SHFE 1110 lead contract prices opened lower at RMB 16,785/mt dragged down by LME lead prices overnight, and then inched down to RMB 16,560/mt. In the afternoon, SHFE lead prices moved steadily between RMB 16,610-16,650/mt, finding support at the 20-day moving average, with prices closing at RMB 16,635/mt, down RMB 150/mt. Trading volumes decreased by 378 lots to 772 lots, and total positions decreased by 62 lots to 3,900 lots.

In domestic spot markets, well-known brands such as Nanfang, Chihong Zn & Ge and Chengyuan were quoted between RMB 16,300-16,350/mt, with discounts of negative RMB 380-400/mt against SHFE 1110 lead contract prices. Other brands such as Shuangyan were quoted around RMB 16,280/mt. In the afternoon, well-known brands were generally traded around RMB 16,300/mt, with the wait-and-see sentiment prevailing in the market.

Last Friday, SHFE 1111 zinc contract prices opened lower below the 5-day moving average at RMB 17,180/mt, and then dipped to RMB 16,985/mt tracking LME zinc prices. Finally, SHFE three-month zinc contract prices closed at RMB 17,065/mt, down RMB 195/mt, or down 1.13%. Trading volumes increased by 10,000 lots to 345,056 lots, and total positions increased by 13,662 lots to 274,980 lots.

In domestic spot markets, #0 zinc was traded around RMB 16,950/mt in the morning session, with prices tumbling to RMB 16,900/mt along with SHFE zinc prices, with discounts of negative RMB 80/mt against SHFE 1110 zinc contract prices. #1 zinc was traded around RMB 16,850/mt. Downstream buying interest was low ahead of the weekend, leaving transactions quiet.

Spot tin transactions turned sluggish again on September 2nd following LME tin prices’ gain-stop on previous day and un-inspiring movements on the day followed. Trading prices were relatively high in the morning, with mainstream tin brands Yunxi, Yunheng and Nanshan etc. mainly traded between RMB 196,500-197,000/mt. In the afternoon, however, goods holders lowered their quotes due to sluggish transactions, with mainstream trading prices falling to RMB 196,000-196,300/mt. But this move was ill-responded and transactions in the afternoon remained sluggish. Though remaining limited market supply can provide some support, weak consumption and inflow of imported tin will erode market demand, thereby making it difficult for domestic tin prices to rise.

On Thursday, LME nickel prices opened at USD 22,208/mt and closed at USD 21,775/mt, down by USD 515/mt from a day earlier, with the highest price at USD 22,280/mt and the lowest price at USD 21,672/mt. On Friday, LME nickel prices slightly advanced to USD 21,800/mt after opening at USD 21,700/mt. Later, LME nickel prices were weighed down to hit a low of USD 21,525/mt due to stronger US dollar, with prices largely moving between 5-day and 20-day moving average. Friday’s non-farm employment data from the US will guide market performance to certain extent. LME nickel inventories were 103,290 mt, down 1,212 mt from a day earlier.

In the Shanghai nickel spot market, trading sentiment continued to be quiet. Traders raised offers in the morning trading hours, but spot transactions were sluggish due to bearish performance of Friday’s LME nickel price performance. Mainstream traded prices of nickel from Russia were in the RMB 162,000-162,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 162,800-163,000/mt range. Transactions were largely made among traders, with few downstream consumers entering market.


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