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SMM Daily Review - 2011/9/8 Base Metals Market
Sep 9,2011 09:20CST
price review forecast
SHFE 1111 copper contract prices, the most active one, opened up RMB 630/mt at RMB 68,080/mt on Thursday.

SHANGHAI, Sept. 9 (SMM) --
SHFE 1111 copper contract prices, the most active one, opened up RMB 630/mt at RMB 68,080/mt on Thursday. As LME copper prices continued to move lower after falling below USD 9,100/mt due to a slight rebound in the US dollar during the whole trading day, and since Chinese stock markets lost 2,500 points in the afternoon session, SHFE three-month copper contract prices met resistance to rebound, with the high-end only touching RMB 68,170/mt. Later, SHFE three-month copper contract prices moved downward further, and met pressures at the daily moving average, gradually narrowing the daily gains and dropping to RMB 67,710/mt in the afternoon session. Finally, SHFE 1111 copper contract prices closed at RMB 67,730/mt, up RMB 270/mt or 0.4%. Positions for SHFE 1111 copper contracts were down 9,100 lots, and trading volumes were down 43,696 lots. Markets were obviously cautious before the release of China's CPI data for August.  

In the spot market, SHFE failed to rebound, increasing both speculators and downstream producers' wait-and-see attitudes, but copper supply was sufficient. In this context, copper premiums narrowed compared with the previous trading day, reporting between discounts of negative RMB 50/mt and premiums of positive RMB 20/mt. Traded prices for standard-quality copper were between RMB 67,850-67,900/mt in the morning business, and RMB 67,950-68,000/mt for high-quality copper. Spot copper prices hovered around RMB 68,000/mt during the whole trading day, with low sentiment of keeping up with rising prices, and market transactions were weak. SHFE copper prices drifted lower in the afternoon session, but weak consumption couldn't easily improve. As a result, copper premiums failed to sustain, and only high-quality copper held premiums of positive RMB 0/mt. Traded prices fell slightly between RMB 67,850-68,000/mt.        

Most active SHFE 1111 aluminum contract opened higher at RMB 17,450/mt on September 8th, and fluctuated below the opening price due to profit-taking by the longs and position building at higher prices among the shorts. The contract rebounded at the tail of trading to the daily moving average on profit-taking by the shorts, and finally closed at RMB 17,435/mt, up RMB 60/mt or 0.35% from previous trading day. Positions of the contract increased 728 lots to 118,196 lots. Transactions of the contract dropped to over 20,000 lots as investors were cautious while waiting for China’s August CPI scheduled to be announced today. SMM expects resistance at RMB 17,450/mt to remain strong in the short term due to strong short momentum.

Traded prices of spot aluminum in Shanghai were between RMB 17,800-17,830/mt on September 8th, with premiums of positive RMB 10-40/mt over SHFE current-month aluminum prices. In the morning, the narrow range fluctuation in SHFE current-month aluminum price following a higher opening helped spot aluminum consolidate at above RMB 17,800/mt. However, as downstream buyers stayed back, mainstream traded prices quickly slipped and market transactions were rarely seen. In the afternoon, spot quotations were kept steady between RMB 17,800-17,810/mt, and only a few middlemen purchased at lower prices. Market transactions remained limited.

On Thursday, SHFE lead prices opened slightly higher at RMB 16,685/mt, tracking LME lead prices overnight, and surged to RMB 16,705/mt but met resistance at RMB 16,700/mt, fluctuating between RMB 16,600-16,650/mt. Finally, SHFE lead prices closed at RMB 16,610/mt, down RMB 50/mt. Trading volumes decreased by 112 lots to 388 lots, and total positions decreased by 58 lots to 3,652 lots.

In domestic spot markets, spot discounts of well-known brands such as Nanfang and Chihong Zn & Ge were around negative RMB 300/mt against SHFE 1110 lead contract prices, with traded prices around RMB 16,300/mt, and other bands such as Hanjiang were quoted around RMB 16,240/mt. Spot prices were steady in the afternoon, and the market mainly adopted a wait-and-see attitude ahead of the Mid Autumn Day Festival, with downstream buyers only purchasing on an as-needed basis.

On Thursday, SHFE three-month zinc contract prices opened higher at RMB 17,200/mt, drove up by LME zinc prices overnight, and fluctuated between RMB 17,100-17,200/mt in the morning session. At the end of trading, SHFE three-month zinc contract prices rolled back previous gains to close at RMB 17,070/mt, up RMB 50/mt. Trading volumes decreased by nearly 100,000 lots to 217,558 lots, and total positions decreased by 7,954 lots to 243,396 lots.

In domestic spot markets, #0 zinc was traded between RMB 16,900-16,950/mt, with discounts of negative RMB 200-220/mt against SHFE 1111 zinc contract prices, but with transactions quiet. #1 zinc was traded between RMB 16,850-16,900/mt, with spot discounts modestly expanding. Some traders entered the market, causing the overall transactions to improve. Spot discounts narrowed to negative RMB 180-220/mt with falling SHFE zinc prices at the end of trading, but downstream buying interest was lower.

Spot tin prices on September 8th in Shanghai were little changed from previous trading day. Traded prices of Yunxi, Yunheng, Nanshan, Kaiyuan and Lvsexinan branded tin were between RMB 194,500-196,800/mt. Market players turned cautious after LME tin prices failed to climb further. This combined with remaining weak consumption and impact from imported tin caused huge upward resistance for domestic tin prices. However, given relatively tight market supply, SMM expects a standoff in the near term.

On Wednesday, LME nickel prices opened at USD 20,825/mt and closed at USD 21,798/mt, up USD 971/mt from a day earlier, with the highest price at USD 21,835/mt and the lowest price at USD 20,825/mt. On Thursday, LME nickel prices were weighed below USD 22,200/mt after opening at USD 21,721/mt during the Asian trading hours, finding support at 10-day moving average. The US dollar index was relatively stable. In addition, market sentiment was relatively cautious before release of Obama’s job-creation plan.  LME nickel inventories were 99,180 mt, down 1,278 mt from a day earlier.

In the Shanghai nickel spot market, traded prices of spot nickel were relatively mixed. Thursday’s LME nickel price decline also dragged down spot nickel prices. During the morning trading hours, traded prices of nickel from Jinchuan Group were relatively high in the RMB 163,500-164,000/mt range, and traded prices of nickel from Russia were in the RMB 162,500-163,000/mt range, due to higher offers in the market since Wednesday’s LME nickel price rally raised expectation that Jinchuan Group would raise its ex-works nickel prices.  When LME nickel prices slipped in the afternoon trading hours on Thursday, trading sentiment and traded prices in spot nickel prices were both dampened. Traded prices of nickel from Jinchuan Group slipped in the RMB 162,000-162,500/mt range and mainstream traded prices of nickel from Russia were in the RMB 161,000-161,500/mt range. Overall trading sentiment was lackluster, as LME nickel price decline in the afternoon trading hours dampened traders’ sentiment.    


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