SMM Daily Review – 2011/9/6 Base Metals Market

SHANGHAI, Sept. 7 (SMM)--

Copper:
SHFE 1111 copper contract prices, the most active one, opened down RMB 400/mt at RMB 67,100/mt on Tuesday. Since LME copper prices fell below USD 8,900/mt after breaking through USD 9,000/mt on the previous trading day, SHFE three-month copper contract prices moved lower during the major trading hours following fluctuations due to pressures, but the decline eased after touching the RMB 66,400/mt mark, with a low of RMB 66,330/mt. At the tail of trading, SHFE three-month copper contract prices gradually narrowed daily declines after LME copper prices rebounded. Finally, the most actively-traded copper contract prices closed at RMB 67,000/mt, down RMB 500/mt or a loss of 0.74%. Positions for the most actively-traded copper contracts were up 4,258 lots, and trading volumes were up 65,434 lots. After closing down for four consecutive days, and since trading volumes increased significantly, SHFE three-month copper contract prices gradually quickened the pace of falling. With pressures gathering at the moving averages, SHFE three-month copper contract prices would look for a support at RMB 66,000/mt in the near term.       

In the spot market, copper supply increased obviously, as copper for hedge trading came on the markets, and since imported copper arrived in due to previous quotation pricing. Hence, spot copper premiums failed to increase, even if SHFE copper prices moved lower after a low open, with offers quoted between premiums of positive RMB 20-70/mt, nearly flat with the previous trading day. Trade prices for standard-quality copper were between RMB 66,950-67,200/mt in the morning business, and RMB 67,050-67,350/mt for high-quality copper. Downstream producers made purchases on an as-needed basis, keeping market transactions weak. SHFE copper prices rallied after falling, but real transactions were still limited, causing copper premiums to fail to rise. Premiums for high-quality copper were reported near positive RMB 50-80/mt, and RMB 20-30/mt for standard-quality copper, virtually unchanged from the morning levels. Traded prices, however, lost RMB 67,000/mt, and fell between RMB 66,700-66,800/mt, and transactions were mainly made by traders.      

Aluminum:    
Following a plunge in financial markets overnight, most active SHFE 1111 aluminum contract opened lower at RMB 17,320/mt on September 6th. After hitting an intraday low of RMB 17,215/mt in the morning due to strong short momentum, the contract rebounded slightly in the afternoon with profit-taking by the shorts, and finally closed at RMB 17,295/mt, down RMB 90/mt or 0.52% from previous trading day. Total positions of the contract rose by 1,526 lots to 122,814 lots. Most active SHFE aluminum contract prices fluctuated downward due to strong resistance at the moving averages above. However, the downward space was limited by short swing speculations during the day. And with inadequate upward momentum, SMM expects the contract to test RMB 17,300/mt in the short term.

Trading prices of spot aluminum in Shanghai were between RMB 17,700-17,740/mt on September 6th, with premiums of positive RMB 50-80/mt over SHFE current-month aluminum prices. In the morning, with a five-day loss in SHFE aluminum prices, most spot aluminum buyers chose to exit the market while most goods holders were actively touting their goods. Though spot quotes fell to RMB 17,700/mt, purchases in the market remained few, thereby leading to sluggish transactions in the morning. In the afternoon, despite a slight rebound in SHFE aluminum prices at the tail of trading following previous fluctuation, some goods holders lowered their quotes to RMB 17690/mt to promote transactions on sparse purchases, but ended with failure. The spot aluminum market was extremely quiet in the afternoon.

Lead:
On Tuesday, SHFE lead prices opened slightly lower at RMB 16,515/mt and then fluctuated around the moving average. Dragged down by LME lead prices, SHFE lead prices plummeted to RMB 16,360/mt at noon, and moved between RMB 16,360-16,400/mt in the afternoon, with prices finally closing at RMB 16,445/mt, down RMB 110/mt. Trading volumes only increased by 6 lots to 704 lots, while total positions decreased by 6 lots to 3,794 lots.
In domestic spot markets, spot prices were RMB 100-150/mt lower than the previous trading day’s. Well-known brands such as Nanfang and Chihong Zn & Ge were quoted around RMB 16,200/mt, with discounts of negative RMB 300/mt against SHFE 1110 lead contract prices. Spot prices further dropped to RMB 16,150/mt as of 11:00 am with SHFE lead prices. SHFE lead prices moved around RMB 16,400/mt in the afternoon, dragging down traded prices of Chihong Zn & Ge to RMB 16,100/mt, while Nanfang was traded between RMB 16,060-16,080/mt, and Shuangyan and Hanjiang were generally quoted around RMB 16,050/mt. As prices had fallen to the RMB 16,000/mt level, smelters were reluctant to sell goods, causing goods supply available in the market to fall, while players were also cautious, leaving transactions quiet.

Zinc:
On Tuesday, SHFE three-month zinc contract prices opened lower at RMB 16,940/mt, moving between RMB 16,900-17,000/mt in the morning session. Dragged down by LME zinc prices, SHFE three-month zinc contract prices dipped to RMB 16,670/mt in the midday, but gained back some losses at the end of trading due to rebounding LME zinc prices and since some shorts left the market with profit-taking, finally closing at RMB 16,855/mt, down RMB 165/mt. Trading volumes increased by nearly 70,000 lots to 457,888 lots, and total positions increased by 176 lots to 264,250 lots.

In domestic spot markets, #0 zinc was traded around RMB 16,800/mt in the morning, with discounts of negative RMB 160/mt against SHFE three-month zinc contract prices, but prices fell to as low as RMB 16,600/mt as noon, tracking SHFE zinc prices, with discounts remaining between negative RMB 140-160/mt. #1 zinc was traded between RMB 16,550-16,600/mt. Spot zinc was quoted as low as RMB 16,550/mt in the afternoon in response to the tumbling SHFE zinc prices, with downstream buyers active at lower prices. Smelters continued moving goods due to the pressure from tight cash flow, weighing down zinc prices.

Tin:
Spot tin prices in Shanghai followed movements of LME tin prices today, with quotes little changed from previous day in the morning. In the afternoon, after LME tin prices showed a falling trend, a few traders chose to clear certain inventories, with prices of those from Jiangxi and Guangdong falling to RMB 194,000-195,500/mt during the day. Shanghai tin prices slightly rebounded later with stabilizing LME tin price, and mainstream trading prices climbed to RMB 195,000-196,800/mt. Mainstream trading brands in the afternoon were Yunxi, Yunheng, Yunxiang, Nanshan, Kaiyuan and Lvsexinan etc. Overall market transactions remained sluggish. As downstream demand stayed weak, spot tin prices are not likely see significant improvement in the short term.

Nickel:
On Monday, LME nickel prices opened at USD 21,500/mt and closed at USD 20,995/mt, down by USD 465/mt from a day earlier, with the highest price at USD 21,600/mt and the lowest price at USD 20,741/mt. On Tuesday, after opening at USD 20,800/mt, LME nickel prices initially slipped but later rebounded during the Asian trading hours, with prices hitting a low of USD 20,630/mt. During the afternoon trading hours, LME nickel prices were boosted to point to USD 21,000/mt due to significant decline of the US dollar.  LME nickel inventories were 101,610 mt, down 798 mt from a day earlier.

In the Shanghai nickel spot market, traded prices were mixed. During the morning trading hours, Jinchuan Group cut ex-works nickel prices by RMB 3,000/mt to RMB 160,000/mt, dragging down spot nickel prices o certain extent. Coupled with decline of LME nickel prices on Tuesday, spot nickel prices fell below USD 160,000/mt. During the morning trading hours, traded prices of nickel from Jinchuan Group were in the RMB 159,000-159,500/mt range, and traded prices of nickel from Russia were in the RMB 158,000-158,500/mt range.  Spot nickel prices slipped further during the afternoon trading hours. Traded prices of nickel from Jinchuan Group were around RMB 158,000/mt and mainstream traded prices of nickel from Russia were in the RMB 156,500-157,000/mt range. Overall transactions were quiet. Transactions were largely made among traders, while downstream consumers largely adopted a wait-and-see attitude.