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SMM Daily Review - 2011/9/15 Base Metals Market
Sep 16,2011 10:23CST
price review forecast
In the spot market, SHFE copper prices fluctuated narrowly after the opening.

SHANGHAI, Sept. 16 (SMM) --


SHFE 1111 copper contract prices, the most active one, opened down RMB 240/mt at RMB 65,340/mt on Thursday. In the morning business, as LME copper prices met resistance several times when trying to reach USD 8,700/mt, SHFE three-month copper contract prices suffered increasingly higher selling pressures and fell to a low of RMB 64,700/mt. However, SHFE three-month copper contract prices climbed to RMB 65,590/mt after the Shanghai Composite Index rallied to test 2,500 points. In the afternoon session, since the Shanghai Composite Index failed to reach 2,500 points, SHFE three-month copper contract prices lost support, and slid below the daily moving average. SHFE 1111 copper contract prices finished the day at RMB 65,080/mt, down RMB 500/mt or 0.76%. Positions for SHFE 1111 copper contracts were up 302 lots and trading volumes were down 39,182 lots, while positions and trading volumes for SHFE 1112 copper contracts were up 9,366 lots and 40,518 lots, respectively. The shift of the most actively-traded copper contracts was expected to be completed on Friday. Growth in short investors’ strength was still obvious. Recently, SHFE three-month copper contract prices kept fluctuating weakly due to impacts of macro environment, trying to search support near RMB 65,000/mt. SHFE three-month copper contract prices could find no support at any moving averages for the low-end, suggesting the market was oversold.         
In the spot market, SHFE copper prices fluctuated narrowly after the opening. As Thursday was the last trading day before the delivery date, the price gap between SHFE 1109 and 1110 copper contracts remained more than RMB 300/mt, cargo-holders were eager to sell for cash generation, with offers mostly reported between discounts of negative RMB 200-100/mt.  Near the midday, as the price gap between SHFE 1109 and 1110 copper contracts gradually reduced to RMB 0/mt, cargo-holders’ willingness in moving goods weakened, helping copper discounts fall to negative RMB 100-0/mt. Traded prices for standard-quality copper were between RMB 65,250-65,400/mt in the morning business, and RMB 65,350-65,550/mt for high-quality copper. Spot copper supply was over ample during the whole trading day. Despite mixed price offers, buyers increased purchases at the lows, improving market transactions. In the afternoon session, SHFE copper prices fluctuated weakly and had signs of moving lower. In this context, cargo-holders tried to hold slight premiums of positive RMB 20/mt for high-quality copper, and were unwilling to offer standard-quality copper with discounts, since they were waiting for better transactions after the delivery date. Traded prices were firm between RMB 65,300-65,400/mt. Due to sufficient market supply, premiums failed to sustain.  
After opening slightly lower at RMB 17,300/mt, most active SHFE 1111 aluminum contract climbed slightly to an intraday high of RMB 17,385/mt in the morning with weakening short momentum and longs entering the market at lower prices. In the afternoon, after Shanghai Composite Index erased earlier gains, the contract also dipped on profit-taking by the longs, and finally closed at RMB 17,335/mt, up RMB 15/mt or 0.09% from previous trading day. Positions of the contract decreased 298 lots to 119,556 lots. SMM expects the contract to struggle at the 20-day moving average in the short term due to coming standoff between weakening shorts and strengthening longs.
Traded prices of spot aluminum in Shanghai were between RMB 17,650-17,690/mt on September 15th, with discounts of RMB 0-50/mt over SHFE current-month aluminum price. In the morning, as SHFE current-month aluminum contract price opened lower and moved down to near RMB 17,700/mt with a price gap of around RMB 200/mt over SHFE 1110 aluminum contract price, goods holders actively touted their goods with discounts widening to RMB 50/mt, dragging down spot aluminum price to below RMB 17,700/mt for the first time since August 9th. Though this move attracted some downstream buyers to purchase, overall market supply was evidently excessive due to limited demand. In the afternoon, the bearish market sentiment slightly weakened following SHFE current-month aluminum contract’s return to RMB 17,700/mt, with a few quotations seen at RMB 17,650-17,700/mt. However, no market transactions were reported due to strong wait-and-see sentiment among both sellers and buyers.


On Thursday, SHFE lead prices opened lower at RMB 16,345/mt, and then dipped to RMB 16,245/mt. Boosted by stock markets, SHFE lead prices rallied to the moving average, but further dropped to RMB 16,300/mt in the afternoon. At the end of trading, SHFE lead prices further fell to close at RMB 16,275/mt, down RMB 75/mt. Total positions decreased by 206 lots to 2,920 lots, and trading volumes decreased by 118 lots to 418 lots.

In domestic spot markets, Well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 16,140-16,160/mt, with discounts of negative RMB 200/mt against SHFE 1110 lead contract prices. The brand of Shuangyan was quoted between RMB 16,160-16,080/mt. Prices of Nanfang and Chihong Zn & Ge were adjusted to RMB 16,130/mt in the afternoon as SHFE lead prices fell, causing downstream buying interest to improve. Traders were aggressively selling off goods due to pessimistic speculations, with transactions improving.


On Thursday, SHFE three-month zinc contract prices opened slightly lower RMB 16,820/mt, continuing falling to RMB 16,685/mt in the morning session. As Shanghai Stock Exchange composite index rebounded, SHFE three-month zinc contract prices gained back previous losses and touched an intraday high RMB 16,865/mt at noon, with prices closing at RMB 16,780/mt, down RMB 70/mt. Trading volumes decreased by over 90,000 lots to 254,758 lots, and total positions decreased by 18,072 lots to 213,382 lots. Market players were generally cautious, leaving transactions quiet.
In domestic spot markets, # 0 zinc was traded as low as RMB 16,550-16,600/mt in the morning. As SHFE zinc prices rose later the day, discounts remained between negative RMB 130-150/mt against SHFE three-month zinc contract prices, while # 0 zinc was traded between RMB 16,650-16,700/mt, and #1 zinc was traded between RMB 16,600-16,650/mt. Downstream buyers were cautious due to falling zinc prices, leaving transactions muted. Although some downstream buyers increased purchases as SHFE zinc prices were fluctuating at low levels in the afternoon, the overall transactions did not improve. 

Domestic tin price continued its dial back despite steady prices of Yunxi etc. branded tin and rebounding LME tin prices in the morning session. The bearish sentiment still prevailed in domestic tin market, with demand improvement hardly seen in spite of luring lower prices of imported as well as Jiangxi tin. Mainstream traded prices for Jiangxi tin and other obscure brands were between RMB 191,500-192,000/mt. Mainstream branded tin mainly traded between RMB 195,000-195,500/mt.


On Thursday, LME nickel prices hit a high of USD 21,525/mt and test the lowest of USD 21,250/mt after opening at USD 21,350/mt. LME nickel inventories were down 486 mt to 98,220 mt. Trading sentiment was relatively quiet, and LME nickel prices largely moved between USD 21,260/mt and USD 21,450/mt during the morning trading hours. During the European trading hours, the US dollar slipped amid rising euro, and LME base metal prices rallied. LME nickel prices advanced from USD 21,229/mt to USD 21,525/mt. Boosted by better-than-expected Italian August Harmonised Index of Consumer Prices (HICP), Euro zone August Harmonised Index of Consumer Prices (HICP), and Euro zone Q2 employment rate, coupled with conviction that Greece will remain in the euro zone at a teleconference participated by Germany, France and Spanish, market concern over the European debt crisis was temporarily eased. With the US dollar falling from 77 to 76.53 along with rising euro, LME nickel prices advanced to USD 21,700/mt and held firm above USD 21,500/mt.

In the Shanghai nickel spot market, offers were in the RMB 158,000-159,500/mt range during the morning trading hours. Mainstream traded prices of nickel from Jinchuan Group were between RMB 159,000-159,500/mt, and mainstream traded prices of nickel from Russia were around RMB 158,000/mt. Supply of goods was sufficient in the market. It was reported that around 600 mt of Russian nickel entered spot market last week, coupled with previous influx of Russian nickel, supply of Russian nickel was ample, but transactions were quiet. It was reported that pre-holiday stock replenishment will increase before late September.


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