SMM Daily Review - 2011/9/7 Base Metals Market

SHANGHAI, Sept. 8 (SMM) --
Copper:
SHFE 1111 copper contract prices, the most active one, opened up RMB 520/mt at RMB 67,100/mt on Wednesday, with prices moving upside after a high open. After the opening, SHFE three-month copper contract prices kept fluctuating narrowly around the daily moving average, and the low-end was supported by the closing price RMB 67,100/mt on the prior trading day. Near the midday, a drop in the US dollar helped LME copper prices rise above USD 9,000/mt, and the Shanghai Composite Index increased nearly 1.9% after breaking through 2,500 points. In response, short investors closed positions in a large scale, which drove SHFE three-month copper contract prices to touch an intraday high RMB 67,860/mt in the afternoon session. Finally, SHFE 1111 copper contract prices closed at RMB 67,800/mt, up RMB 1,020/mt or 1.53%. Positions for SHFE 1111 copper contracts were down 2,138 lots, and trading volumes were down 69,434 lots. After closing down for four consecutive days, SHFE three-month copper contract prices returned to move between the 20 and the 30-day moving averages.   

In the spot market, as SHFE copper prices opened more than RMB 500/mt higher, and since market supply was ample due to cargo-holders’ activeness in moving goods for cash generation, copper premiums were dampened. However, standard-quality copper refused to trade at discounts in the morning business, and mainstream spot offers were quoted between premiums of positive RMB 0-50/mt. Near the midday, as SHFE copper prices increased slightly, some standard-quality copper was seen to make offers between discounts of negative RMB 30-20/mt. Trade prices for standard-quality copper were between RMB 67,330-67,380/mt in the morning business, and RMB 67,380-67,450/mt for high-quality copper. Standard-quality copper narrowed its price gap with high-quality copper during the whole trading day, and traded prices for spot copper stood above RMB 67,000/mt again. But downstream producers and traders were mixed towards the outlook, and market transactions were still mainly made by traders for speculative purpose. As SHFE copper prices rose by RMB 400/mt in the afternoon session, discounts for standard-quality copper expanded to negative RMB 50/mt, while high-quality copper kept traded at premiums of positive RMB 0/mt. Cargo-holders were reluctant to sell when SHFE current month copper contract prices stood above RMB 67,700/mt, keeping market transactions moderate, but long investors’ sentiment and confidence were boosted.      

Aluminum:
Most active SHFE 1111 aluminum contract opened slightly higher at RMB 17,305/mt on September 7th. With alleviated investor worries towards global economic recession, the Shanghai Composite index rebounded to above the 2,500 mark, forcing shorts in SHFE aluminum market to exit and sending most active SHFE aluminum contract to an intraday high of RMB 17,440/mt. The contract finally closed at RMB 17,425/mt, up RMB 150/mt or 0.87% from previous trading day. Positions of the contract decreased 5,346 lots to 117,468 lots. SMM expects the contract to struggle at RMB 17,400/mt in the short term as the longs failed to follow.

Trading prices of spot aluminum in Shanghai were between RMB 17,750-17,780/mt on September 7th, with premiums of positive RMB 20-50/mt over SHFE current-month aluminum prices. Following a slight rebound in SHFE aluminum prices, spot premiums narrowed to less than RMB 50/mt. Though buying interest was moderate in the market, general market sentiment improved with stabilizing prices. This also boosted goods holder confidence to hold their quotes firm in the future. Mainstream spot quotes rose to RMB 17,760-17,800/mt in the afternoon with continuously rising futures prices. However, as middlemen and downstream buyers were cautious after spot price climbed, no market transaction was seen in the afternoon.

Lead:
On Wednesday, SHFE 1110 lead contract prices opened higher at RMB16,520/mt, moving around RMB 16,500/mt after opening, and rose along with stocks prices as of 11:00 am to touch RMB 16,665/mt. Finally, SHFE 1110 lead contract prices closed at RMB 16,660/mt, up RMB 215/mt, or up 1.31%. Trading volumes decreased by 204 lots to 500 lots, and total positions decreased by 84 lots to 3,710 lots.

In domestic spot markets, spot discounts of well-known brands such as Nanfang and Chihong Zn & Ge were around negative RMB 300/mt, with traded prices between RMB 16,180-16,220/mt, while quotations of other brands were rarely reported. Downstream buyers purchased modestly given steady SHFE lead prices in the morning session. Spot prices were between RMB 16,250-16,300/mt in the afternoon while spot discounts remained between negative RMB 300-320/mt. A wait-and-see sentiment dominated the market due to rising lead prices.

Zinc:
On Wednesday, SHFE three-month zinc contract prices opened higher at RMB 16,975/mt, struggling around RMB 17,000/mt in the morning session. Boosted by the rising Shanghai Stock Exchange composite index and LME lead prices, SHFE three-month zinc contract prices edged up to close at RMB 17,145/mt, up RMB 320/mt, or up 1.9%. Trading volumes decreased by nearly 140,000 lots to 311,460 lots, and total positions decreased by 12,900 lots to 251,350 lots.

In domestic spot markets, #0 zinc was traded between RMB 16,750-16,800/mt, with transactions mostly made at the low end, and with discounts of negative RMB 150-180/mt against SHFE three-month zinc contract prices. #1 zinc was traded between RMB 16,700-16,750/mt. Transactions improved due to rising zinc prices. Spot discounts against SHFE three-month zinc contract prices expanded to negative RMB 320/mt in the afternoon in tandem with rising SHFE zinc prices, with quotations up to RMB 16,850/mt. But downstream buyers were cautious then.

Tin:
Spot tin prices in Shanghai were generally stable on September 7th. Mainstream tin brands in the morning were Yunxi, Yunheng, Yunxiang, Kaiyuan, Jinlong and Lvsexinan, with mainstream trading prices of RMB 194,800-196,800/mt. A relatively huge amount of Nanshan branded tin arrived in the spot market in the afternoon, which were purchased by traders and then sold again mostly at RMB 194,500/mt, adding to lower-priced goods in the market. Market transactions remained sluggish during the day. With successive arrivals of imported tin at downstream enterprises, domestic tin consumption or price may be dragged down in the near future.

Nickel:
On Tuesday, LME nickel prices opened at USD 20,800/mt and closed at USD 20,827/mt, down by USD 168/mt from a day earlier, with the highest price at USD 20,999/mt and the lowest price at USD 20,500/mt. On Wednesday, LME nickel prices advanced to hit a high of USD 21,180/mt after opening at USD 20,825/mt during the Asian trading hours due to decline in the US dollar, with prices targeting 5-day moving average.  LME nickel inventories were 100,458 mt, down 1,152 mt from a day earlier.

In the Shanghai nickel spot market, Wednesday's LME nickel price advance boosted transactions in the spot market, with increasing number of traders and downstream consumers entering market. 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 advanced along with LME nickel price rally in afternoon trading hours. Traded prices of nickel from Jinchuan Group were around RMB 160,000/mt and mainstream traded prices of nickel from Russia were in the RMB 158,800-159,000/mt range. Overall trading sentiment improved to certain extent. Supply of goods was relatively sufficient, as a large amount of imported goods entered domestic market following improved domestic/LME nickel price ratio. However, affected by weak demand, nickel prices were relatively weak.