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SMM Daily Review - 2011/9/13 Base Metals Market
Sep 14,2011 10:35CST
price review forecast
Source:SMM
Mainstream traded prices of spot aluminum in Shanghai were between RMB 17,780-17,810/mt on September 13th.

SHANGHAI, Sept. 14 (SMM) --

Copper:

SHFE 1111 copper contract prices, the most active one, opened down RMB 1,210/mt at RMB 66,550/mt on Tuesday. After the opening, SHFE three-month copper contract prices narrowly fluctuated around the daily moving average due to severe struggle between the long and short investors, with the fluctuating band around RMB 100/mt. Later, although increasing selling pressures from short investors caused SHFE three-month copper contract prices to meet resistance at the daily moving average, LME copper prices' return above USD 8,800/mt supported the low-end SHFE three-month copper contract prices, which showed some resistance to fall sharply, with an intraday low of RMB 66,160/mt. At the tail of trading, SHFE three-month copper contract prices edged down due to position closings, with prices finally closing at RMB 66,310/mt, down RMB 1,450/mt or 2.14%. SHFE copper contracts posted active performance during the whole trading day, with overall positions increasing by more than 35,000 lots. Positions of SHFE copper contracts for December delivery were up 24,224 lots. Trading volumes for SHFE 1111 copper contracts were up 85,418 lots, while positions were up by more than 12,000 lots in the afternoon session, but were up 9,828 lots due to position closings at the tail of trading. SHFE copper prices were already pressured by all moving averages, and would test the support at RMB 66,000/mt with increasing selling pressures from short investors.          
 
In the spot market, as SHFE copper prices opened more than 2% down, spot copper tried to hold premiums at the beginning of opening, with offers for high-quality copper reporting between premiums of positive RMB 0-50/mt. However, as hedged copper came into the markets in large amounts, copper supply increased significantly, with imported copper dominating the spot copper market. In this context, imported copper was the first to be traded between premiums of RMB 0/mt and discounts. Traded prices for standard-quality copper were between RMB 66,800-66,900/mt in the morning session, and RMB 66,850-66,950/mt for high-quality copper. Bearish sentiment overshadowed the spot market again. Furthermore, as downstream producers already made some stocks before the Chinese Mid-Autumn Festival holiday, the characteristic of market surpluses was more pronounced. Although some speculators made purchases at low prices, market transactions still felt weak. SHFE copper prices continued to be weighed down in the afternoon session, and spot copper offers remained discounts of negative RMB 50-0/mt due to ample supply. Traded prices already fell between RMB 66,700-66,800/mt, and there were still some traders making purchases at lows.

SMM conducted a survey concerning copper price trends this week.

Based on the survey, about 48% insiders held pessimistic views toward copper prices this week, believing LME copper prices will fall near USD 8,500/mt and SHFE copper prices will test an earlier low of RMB 63,500/mt. There are too much uncertainty surrounding the markets recently, and negative news came one after another. Escalating European debt problems and slow economic recovery in the US have caused low market sentiment. The Consumer Confidence Index and Manufacturing Index in the US haven’t recovered, further dampening market confidence, and increasing risk aversion sentiment. In this context, the US dollar index closed higher for nine consecutive days in the past 11 trading days, increasing to 77.78 from 73.7. In contrast, worsening European debt crisis caused the euro to close down for nine consecutive days in the past 11 trading days, declining below 1.35 from a high of 1.45. Before the final decision of the US jobs stimulus package and the introduction of loose monetary policies, the US dollar index will remain strong. Gold prices have returned USD 1,800/oz from USD 1,920/oz, which led commodity prices to fall back. Technically, both LME and SHFE copper prices have moved below all moving averages, and are unlikely to stop falling in the short term with more upward pressures gathering. Spot copper supply in domestic markets is sufficient, since the Shanghai Future Exchange (SHFE) has announced copper inventories have increased significantly for two straight weeks, a total increase of 11,042 mt to 113,300 mt. Finance-driven cargo-holders of imported copper are active moving goods to generate cash, and even as the delivery date approaches, they could hardly maintain premiums, which will weigh down SHFE copper prices. Therefore, due to a lack of support, copper prices will move downside this week.      

Approximately 42% insiders believed although copper prices suffered selling pressures from short investors, there is still buying support at the low-end. Therefore, they believed LME copper prices will move between USD 8,750-8,950/mt, with limited downside room. Although the European debt problems are growing, the ECB’s attitudes and moves will help the euro stop declining sharply. From the Obama administration’s move of jobs stimulus package, and with the approach of September 20th, market expectations of QE3 implementation are rising, which will dampen the US dollar's rising momentum and support the low-end copper prices. The preliminary import data released the previous day revealed that China’s imports of unwrought copper and copper semis were 340,398 mt in August, up 11% on a monthly basis, and that China’s refined copper output for the first eight months of 2011 was 3.642 million mt, up 16.3% YoY, highlighting China’s strong copper demand. As domestic copper markets resumed after the Chinese Mid-Autumn Festival holiday, China’s buying power will provide a strong support for copper prices. 

The remaining 10% insiders kept optimism unchanged, expecting LME copper prices will increase to USD 9,000/mt after testing support at USD 8,750/mt. The weak US economic data and proposal of jobs stimulus package are all paving roads for further introduction of loose monetary policies. Hence, the US dollar will fall from highs, which will boost copper prices. Although the European debt crisis persists, copper fundamental side is positive. Therefore, once the Europe’s debt worries ease, short investors’ strength will be released, which will lift copper prices. The approach of delivery date also gives a support for SHFE current-month copper contract prices, and effects of high demand period of September and October and downstream producers’ buying at lows will also support the low-end copper prices. In summary, demand will finally push up copper prices. 
 
Aluminum:
 
Most active SHFE 1111 aluminum contract opened lower at RMB 17,430/mt on the first trading day following China’s Mid-Autumn Festival. Due to a bearish economic environment, domestic investors successively exited the market. Transactions during the day were less than 30,000 lots and positions of the contract saw a huge decrease of 1,702 lots. After narrowly fluctuating near RMB 17,400/mt, the contract finally closed at RMB 17,390/mt, down RMB 75/mt or 0.43%. Though SHFE aluminum closed lower due to pressure from global financial market, the metal avoided a large-scale selling backed by positive fundamentals. It also reported less loss compared with other base metals. Since market sentiment will be cautious while waiting for coming conventional peak season, SMM expects most active SHFE aluminum contract to test RMB 17,450/mt in the short term.
 
Mainstream traded prices of spot aluminum in Shanghai were between RMB 17,780-17,810/mt on September 13th, with discounts of RMB 10/mt to premiums of RMB 20/mt over SHFE current-month aluminum prices. In the morning, though SHFE current-month aluminum prices narrowly fluctuated at RMB 17,800/mt, purchases and requires were rarely seen as downstream buyers were pessimistic towards future aluminum prices. Meanwhile, some goods holders who were cautiously bearish towards future aluminum price trends actively sold their goods at lower prices, with slight discounts being reported. Other goods holders, on the contrary, were unwilling to sell goods at lower prices due to relatively stable aluminum futures prices. Overall market transactions were sparse due to a standoff between sellers and buyers. In the afternoon, SHFE current-month aluminum price maintained narrow-range fluctuation, market transactions turned even more sluggish due to strong wait-and-see sentiment. Only a few quotations at RMB 17,780/mt were heard, but transactions were rarely seen due to a lack of purchases.
 
SMM average aluminum ingot price during the week from September 5th to 9th was RMB 17,794/mt, with a slight dip of RMB 16/mt or 0.09% from previous week.
 
A recent SMM survey shows 64% of market respondents are neutral towards aluminum price trend of this week. These respondents expect aluminum price to keep fluctuating within a narrow range before consumption improves, as low market confidence caused by weak global economy will be offset by positive fundamentals including remaining low stock and reduced output due to power restrictions in certain regions in South China.
 
26% of respondents are pessimistic, since aluminum consumption is damped due to deteriorating inflation and debt woes, and even though China’s conventional peak season has started, demand growth is not seen at present. Therefore, aluminum price will more likely move down during this four-trading-day week with sluggish investor confidence in financial markets.
 
Remaining 10% of respondents, on the contrary, are optimistic. They believe downstream growth, though stagnated at present, will show this week as there are already signs of production recovery. With positive fundamentals, upward momentum of aluminum price still exists, which will help aluminum price climb this week.

Lead:

On Tuesday, SHFE lead prices opened lower at RMB 16,600/mt, then inched down tracking domestic stocks markets, with prices stabilizing to move between RMB 16,400-16,460/mt later the day. In the afternoon, SHFE lead prices found support at RMB 16,480/mt, but fell further at the end of trading, closing at RMB 16,420/mt, down RMB 180/mt, or down 1%. Trading volumes decreased by 140 lots to 396 lots, and total positions decreased by 128 lots to 3,350 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 16,220-16,250/mt, with discounts narrowing to negative RMB 200-250/mt against SHFE 1110 lead contract prices. Other brands such as Hanjiang and Chengyuan were quoted between RMB 16,150-16,200/mt. Traders were moving goods modestly, while downstream buyer were cautious, believing prices will fall, leaving transactions quiet.

With regard to lead price trends this week, 60% market players are pessimistic, believing lead prices will fall to RMB 16,000/mt due to ongoing European debt crisis, and as the G7 summit failed to make any substantive progress, dragging down stocks markets. Besides, the US dollar hit a record high at 77.784 given improving risk aversion sentiment.
 
33.3% of insiders believe lead prices will fluctuate between RMB 16,100-16,300/mt due to a lack of support. Besides, smelters are holding goods, while downstream demand will improve.
 
The remaining 6.7% are optimistic. Lead ingot inventories in Shanghai fell further by 6,000 mt after a drop of 4,000 mt the previous week, a signal of strong demand. LME inventories also fell, with premiums of USD 18/mt, both pushing up lead prices. 
 
Zinc:

On Tuesday, SHFE three-month zinc contract prices plummeted below the moving average after opening, dragged down by LME zinc prices overnight, fluctuating between RMB 16,850-16,950/mt during the day. In the afternoon, SHFE three-month zinc contract prices gained back previous losses due to rising Shanghai Stock Exchange composite index, and closed at RMB 16,945/mt, down RMB 175/mt, or down 1.02%. Trading volumes increased by over 70,000 lots to 318,610 lots, while total positions decreased by 1,796 lots to 231,778 lots.

In domestic spot markets, #0 zinc was traded between RMB 16,700-16,750/mt, with discounts narrowing to negative RMB 150-170/mt against SHFE 1111 zinc contract prices. #1 zinc was traded between RMB 16,650-16,700/mt. Downstream buyers were cautious on the first trading day after the Mid-Autumn Day festival, while traders replenished stocks at lower prices. Spot discounts did not expand despite rising SHFE zinc prices, and downstream buying interest improved, while cargo holders were unwilling to sell goods, leaving transactions muted.

With regard to zinc price trends this week, 60% of market players believe prices will continue to fluctuate, with SHFE three-month zinc contract prices struggling between RMB 16,800-17,200/mt. There is neither positive news, nor downstream strong demand reported, while most smelters are holding goods, which will support spot prices. Spot prices should fluctuate between RMB 16,600-17,000/mt.
 
20% of market players believe that zinc prices will likely rise, to RMB 17,200-17,600/mt, and spot zinc prices will rise to RMB 17,000-17,300/mt in response. Enterprises will build stocks ahead of the National Day holiday, pushing up zinc prices.

The remaining 20% believe that zinc prices will likely fall.

Tin:

Spot tin price saw a slight dip in Shanghai on September 13th. Quotations in the morning were relatively high, but were dragged down in the afternoon by lower priced tin supply from Jiangxi to the lowest RMB 192,500/mt during the day. After the lower priced tin were gradually consumed, spot tin prices slightly stabilized, with mainstream traded prices maintained at RMB 193,000-196,500/mt. Mainstream trading brands during the day were Yunxi, Yunheng, Nanshan, Kaiyuan and Jinlong. Market transactions were relatively sparse as consumption downstream remained weak.
A recent SMM survey shows 80% of market respondents expect a slight dip of domestic tin price this week. Their conclusion was made on lower market confidence due to LME tin price’s long-time fluctuation without any breakthrough at USD 24,000/mt, remaining weak downstream consumption, impact of imported tin as well as increasing lower priced domestic supplies. The other 20% of respondents believe domestic tin price will maintain fluctuation within a narrow range supported by limited supply and high raw materials cost.

Nickel:

Monday, LME nickel prices opened at USD 21,180/mt and closed at USD 21,563/mt, up USD 318/mt from a day earlier, with the highest price at USD 21,655 mt and the lowest price at USD 20,801/mt. On Tuesday, LME nickel prices largely fluctuated around USD 21,500/mt after opening at USD 21,645/mt, without making any significant breakthrough. Market sentiment was still weighed by concern over the European debt crisis. LME nickel inventories were 99,060 mt, down 120 mt from a day earlier.

In the Shanghai nickel spot market, offers were relatively high in the morning trading hours, but prices later slipped along with Tuesday's weak LME nickel prices. Mainstream traded prices of nickel from Russia were in the RMB 159,000-159,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were around RMB 160,500/mt. Overall trading sentiment was quiet, with few downstream consumers entering market. Despite of the onset of high-demand period, consumption still did not improve significantly.

Based on result of an SMM survey, 70% market players believe that nickel prices will be neutral, and will not make significant breakthrough, with support at USD 21,000/mt and resistance at USD 22,000/mt. As market was haunted by concern that the European debt crisis may spread and deteriorate further, most market players are adopting a wait-and-see attitude. 30% market players expect that nickel prices will continue to fall. Based on current LME nickel price performance, prices meet great resistance to advance further, as LME nickel prices failed to make any breakthrough for several times. It is expected that LME nickel prices will continue to extend weak momentum, and low-end prices will slip to certain extent in the coming week.

 

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