SMM Daily Review - 2011/9/14 Base Metals Market

SHANGHAI, Sept. 15 (SMM) --

Copper

SHFE 1111 copper contract prices, the most active one, opened flat at RMB 66,490/mt on Wednesday. Weighed down by the 5-day moving average, LME copper prices moved lower and broke through the USD 8,700/mt mark before the midday. Tracking declines in LME copper prices, SHFE three-month copper contract prices moved downside immediately after the opening, directly sliding below RMB 65,000/mt and falling to an intraday low of RMB 64,850/mt in the afternoon business. However, a brief and quick uplift of stocks prices helped SHFE three-month copper contract prices hover near RMB 65,000/mt. At the tail of trading, due to large-scale position closings by short investors, SHFE 1111 copper contract prices closed down again, to settle at RMB 65,050/mt, a drop of RMB 1,440/mt or 2.17%. Similar to the previous trading day, active speculative activities helped total positions for SHFE copper contracts maintain a high of near 60,000 lots. Positions for SHFE 1112 copper contracts were up 40,910 lots, while positions for SHFE 1111 copper contracts were down 812 lots and trading volumes were up 89,358 lots. Selling pressures from short investors were growing. After declining below RMB 66,000/mt, SHFE three-month copper contract prices already neared an earlier low of RMB 63,480/mt with the moving band shifting away from all daily moving averages, and faced increasing risks to fall further.  
 
In the spot market, SHFE copper prices continued to fall, and both imported copper and hedged copper continuously arrived in the spot market. Besides, the price gap between SHFE 1109 and 1110 copper contracts exceeded RMB 500/mt, which helped offers directly turn into discounts of negative RMB 100/mt from initial premiums of positive RMB 0/mt. Overall spot copper discounts were reported between negative RMB 150-50/mt. Traded prices for standard-quality copper were between RMB 66,150-66,300/mt in the morning business, and RMB 66,200-66,500/mt for high-quality copper. Although some buyers took the opportunity of increasing discounts to make purchases, market surpluses dampened transactions. SHFE copper prices continued to fall in the afternoon session, and bearish sentiment was growing. Coupled with the price gap of RMB 1,100/mt between SHFE 1109 and 1110 copper contracts, cargo-holders were all panic to move goods before the delivery date, leading copper discounts to expand further. As a result, discounts for imported copper expanded to around negative RMB 350/mt, and RMB 250/mt for high-quality copper. Traded prices already fell below the RMB 66,000/mt mark, between RMB 66,500-65,800/mt.   

Aluminum:
 
Most active SHFE 1111 aluminum contract opened slightly higher at RMB 17,400/mt on September 14th. Due to strong bearish sentiment in the market, the contract gradually moved down in the morning, and widened losses in the afternoon after credit rating agency Moody’s downgraded two large French banks to further damp investor confidence on European debt bailout. After hitting an intraday low of RMB 17,250/mt in the afternoon, the contract finally closed at RMB 17,275/mt, down RMB 110/mt or 0.63% from previous trading day. Positions of the contract increased 2,364 lots to 119,854 lots. SMM expects most active SHFE aluminum contract to test RMB 17,200/mt in the short term given prevailing bearish sentiment.
 
Mainstream traded prices of spot aluminum in Shanghai were between RMB 17,760-17,790/mt on September 14th, with discounts of 0-20/mt over SHFE current-month aluminum prices. In the morning, dropping SHFE aluminum price following a higher opening led to strong bearish sentiment in the spot aluminum market, with purchases rarely seen from downstream and middlemen staying away. Though goods holders lowered their quotations to even discounted prices, market transactions remained extremely limited. In the afternoon, as SHFE current-month aluminum price further dipped and fell below RMB 17,700/mt at the tail of trading, market transactions in the spot aluminum market turned even more sluggish, with only a few quotation seen at RMB 17,700-17,750/mt. Goods holders began to hold goods at this juncture due to huge losses, with transactions rarely seen.

Lead:

On Wednesday, SHFE 1110 lead contract prices opened higher at RMB 16,425/mt, and touched RMB 16,565/mt but met resistance at the 5-day moving average later the day. Dragged down by stocks markets, SHFE 1110 lead contract prices plunged to RMB 16,280/mt, a record low since August 10, and rallied to close at RMB 16,350/mt, down RMB 70/mt. Trading volumes only increased by 140 lots to 536 lots, while total positions decreased by 224 lots to 3,126 lots. Trading volumes of SHFE 1109 lead contracts were only 60 lots.

In domestic spot markets, spot prices remained relatively unchanged from the previous trading day. The brands of Nanfang and Chihong Zn & Ge were quoted between RMB 16,200-16,230/mt, with discounts of negative RMB 200/mt against SHFE 1110 lead contract prices. Other brands such as Hanjiang were quoted around RMB 16,150/mt. In the afternoon, well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 16,150-16,180/mt, while other brands were quoted around RMB 16,100/mt. Traders were pessimistic towards price trends, while downstream buyers were also cautious. But as spot lead prices were close to smelters’ costs, transactions improved.

Zinc:

On Wednesday, SHFE three-month zinc contract prices opened at RMB 16,980/mt, and inched down to an intraday low RMB 16,635/mt. In the afternoon, SHFE three-month prices rallied to RMB 16,800/mt as a large number of longs entered the market, but fell slightly at the end of trading to close at RMB 16,710/mt, down RMB 215/mt, or down 1.27%. Trading volumes increased by over 30,000 lots to 341,138 lots, and total positions decreased by 324 lots to 231,454 lots.

In domestic spot markets, #0 zinc was traded between RMB 16,700-16,750/mt in the morning session, with discounts remaining around negative RMB 150/mt against SHFE 1111 zinc contract prices. As SHFE zinc prices fell at noon, spot discounts remained unchanged, while spot prices slumped to RMB 16,700/mt. But cargo holders were seldom moving goods, holding prices firm. #1 zinc was traded between RMB 16,650-16,700/mt. Downstream buyers were cautious due to continuing falling zinc prices, leaving morning transactions lower than the previous day. As SHFE zinc prices fell further in the afternoon, spot discounts remained unchanged, while #0 zinc prices slid to RMB 16,600/mt, causing some downstream buyers to purchase at lower prices. Imported zinc was recently popular in the market, with brands of AZ, and mainly from Peru, with quotations close to #1 zinc prices. But downstream buyers preferred to buy domestic #0 zinc instead of imported zinc.

Tin:
 
After lower-priced Jiangxi tin brands gradually entered the market this week, prices of mainstream Nanshan, Kaiyuan and Jinlong branded tin dropped to near RMB 192,000/mt, and other branded tin including Yunxi and Yunheng traded between RMB 195,000-196,000/mt. As fluctuation continues in LME tin price, smelters previously holding goods for higher prices gradually increased supplies, which dragged down mainstream traded prices. However, market transactions remained sluggish despite lower prices.

Nickel:

On Tuesday, LME nickel prices opened at USD 21,645/mt and closed at USD 21,351/mt, down USD 212/mt from a day earlier, with the highest price at USD 21,710 mt and the lowest price at USD 21,225/mt. On Wednesday, LME nickel prices advanced to USD 21,450/mt after opening at USD 21,400/mt, owing to eased concern over the European sovereign debt crisis. Later, the euro slipped, and the US dollar index advanced from 76.96 to 77.46. In response, LME nickel prices advanced and found support at USD 21,050/m at around 2:00 pm during the Asian trading hours. LME nickel inventories were 98,706 mt, down 342 mt from a day earlier.

In the Shanghai nickel spot market, #1 refined nickel was offered in the RMB 158,500-160,000/mt rang during the morning trading hours, with deals largely made during the morning trading hours at prices between RMB 157,000-160,000/mt. Mainstream traded prices of nickel from Jinchuan Group were around RMB 159,500/mt, and mainstream traded prices of nickel from Russia were around RMB 158,500/mt during the morning trading hours. When LME nickel prices slipped during the afternoon trading hours, mainstream traded prices of nickel from Jinchuan Group were around RMB 158,500/mtmainstream traded prices of nickel from Russia were around RMB 157,500/mt. Affected by LME nickel price decline, traders wait-and-see sentiment was strong.

Large stainless steel mills still purchased refined nickel through long-term contract, and transactions of refined nickel was still limited in spot market, despite the onset of traditional peak-demand period. Deals were still large done among traders, with quiet transactions reported.