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SMM Daily Review – 2011/9/20 Base Metals Market
Sep 21,2011 09:40CST
price review forecast
As LME copper prices slumped nearly 4% on the previous trading day, SHFE 1112 copper contract prices, the most active one, opened down RMB 670/mt at RMB 63,200/mt on Tuesday.

SHANGHAI, Sept. 21 (SMM)--

As LME copper prices slumped nearly 4% on the previous trading day, SHFE 1112 copper contract prices, the most active one, opened down RMB 670/mt at RMB 63,200/mt on Tuesday. After the opening, short investors tried again to dampen copper prices by increasing positions. In this context, SHFE three-month copper contract prices posted weak performance, with prices moving lower after a down open and setting a yearly low of RMB 62,480/mt. However, as some long investors began to come into the market after prices falling below RMB 62,500/mt, and since LME copper prices stopped falling and Chinese stock markets rebounded slightly, the moving band of SHFE three-month copper contract prices immediately returned above RMB 62,500/mt, and narrowly fluctuated around RMB 62,700/mt in the afternoon business. Position closings at the tail of trading helped copper prices break the resistance at the daily moving average. Finally, SHFE 1112 copper contract prices closed at RMB 62,960/mt, down RMB 910/mt or a loss of 1.42%. Positions for SHFE 1112 copper contracts were up 4,770 lots, and trading volumes were up 39,178 lots. Short investors reported great profits during the whole trading day, but their willingness in keeping up with falling copper prices weakened. Markets were awaiting the US Federal Reserve meeting to be held on the evening of September 20th.         

In the spot market, as SHFE copper prices fell more than RMB 1,000/mt, cargo-holders tried to hold premiums despite ample supply. As SHFE copper prices dropped, copper offers     increased from premiums of positive RMB 0-60/mt in the morning business to premiums of positive RMB 20-100/mt in the afternoon session. Traded prices for standard-quality copper were between RMB 63,050-63,200/mt in the morning business, and RMB 63,100-63,350/mt for high-quality copper. With bearish sentiment dominating the market, both downstream producers and traders kept cautious towards purchases, dampening market trading sentiment. In the afternoon session, SHFE copper prices remained weak, but copper supply contracted compared with morning levels, keeping price offers still firm between premiums of positive RMB 0-100/mt. Traded prices were between RMB 63,000-63,250/mt, and market transactions were quiet. 

Most active SHFE 1111 aluminum contract opened lower at RMB 17,120/mt on September 20th and stabilized in the morning following a plunge during previous trading day. The contract hit an intraday high of RMB 17,225/mt in the afternoon, but fluctuated downward later due to strong resistance at the 5-day moving average above. Finally closed price of the contract was RMB 17,190/mt, up RMB 15/mt or 0.09% from previous trading day. Positions of the contract decreased 2,654 lots to 108,896 lots, and transaction volume of SHFE 1112 aluminum contract topped all other contracts. Most active SHFE aluminum contract consolidated at RMB 17,100/mt today and showed more stability compared with other base metals. If the most active contract is changed into SHFE 1112 contract and meets strong resistance at the moving averages above, SMM expects it to test support at RMB 17,000/mt at first.

Traded prices of spot aluminum in Shanghai were between RMB 17,470-17,510/mt on September 20th, with premiums of RMB 120-160/mt over SHFE current-month aluminum price. In the morning, the wait-and-see attitude prevailed in the spot aluminum market after SHFE aluminum price stabilized following a plunge during previous trading day. Except for a few value-retaining transactions and selling at lower prices among traders with high capital pressure, most spot aluminum traders were holding goods. Meanwhile, downstream buying interest at lower prices did not improve due to fluctuating prices and capital pressure, thereby dragging down mainstream trading price to below RMB 17,500/mt. Market transactions were sparse as a result. In the afternoon, after SHFE current-month aluminum contract climbed and even broke through the RMB 17,400/mt mark as a result of profit-taking by the shorts, the wait-and-see sentiment turned even stronger among spot aluminum traders, with only a few quotations at RMB 17,480/mt being reported among several traders with high capital pressure. As inquiries were even less, market transactions were hardly seen.

On Tuesday, SHFE lead prices opened at RMB 15,575/mt, RMB 230/mt lower than the previous day’s opening prices, then touched RMB 15,880/mt. Later the day, SHFE lead prices fell to RMB 15,680-15,750/mt, and finally closed at RMB 15,750/mt, down RMB 240/mt, or down 1.5%. Total positions decreased by 254 lots to 2,294 lots, and trading volumes increased by 480 lots to 2,294 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 15,700-15,760/mt, close to SHFE lead prices. Other brands such as Baiyin were generally quoted around RMB 15,650/mt. The market was cautious due to pessimism. Goods supply available was sufficient as some traders were actively moving goods. Lead prices fell to RMB 15,600-15,700/mt in the afternoon, with the brand Chihong Zn & Ge quoted at RMB 15,750/mt, but with transactions quiet at the high end. Traders reported improving transactions as lead prices fell in the afternoon, while downstream buyers were actively purchasing.

On Tuesday, SHFE three-month zinc contract prices opened lower at RMB 16,280/mt, dipping further to RMB 16,175/mt in the morning session, with prices fluctuating below the moving average during the day. Boosted by the rising Shanghai Stock Exchange composite index, SHFE three-month zinc contract prices rallied to the moving average in the afternoon, gaining back some losses to close at RMB 16,285/mt, down RMB 130/mt, or down 0.79%. Trading volumes decreased by over 70,000 lots to 124,662 lots, and total positions decreased by 21,112 lots to 173,160 lots. The market took a mixed attitude towards price trends as zinc prices fluctuated at low levels, keeping transactions muted.

In domestic spot markets, #0 zinc was traded between RMB 16,130-16,150/mt, with discounts of negative RMB 60/mt against SHFE 1111 zinc contract prices. #1 zinc was traded between RMB 16,100-16,130/mt.

Spot tin price dropped again in Shanghai on September 20th, due to weak LME tin price and consumption. Yunxi branded tin traded between RMB 194,000-194,500/mt. Yunheng and Yunxiang branded tin traded between RMB 191,500-192,000/mt. Branded tin from Jiangxi traded near RMB 190,000/mt. Market transactions stayed quiet, however, despite falling prices. At present mainly Jiangxi tin brands were seen in the market, as smelters in Yunnan were unwilling to sell their goods. Secondary tin supply was also rarely seen in the market, market supplies therefore remained limited.

On Monday, LME nickel prices opened at USD 21,600/mt and closed at USD 21,006/mt, down USD 499/mt from a day earlier, with the highest price at USD 21,600/mt and the lowest price at USD 20,898/mt. On Tuesday, LME nickel prices were weighed to hit a low of USD 20,950/mt after opening at USD 21,100/mt during the Asian trading hours. During Tuesday’s European trading hours, LME nickel prices advanced slightly to hit a high of USD 21,300/mt, due to decline in the US dollar. Market sentiment is expected to be cautious before Federal Reserve monetary policy meeting. LME nickel inventories were 98,046 mt, down 36 mt. 

In the Shanghai nickel spot market, Tuesday’s narrow fluctuation of LME nickel price dampened transactions in spot market. Mainstream traded prices of nickel from Russia were in the RMB 155,000-155,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 157,000-157,200/mt range. Market players largely adopted a wait-and-see sentiment and made transactions cautiously amid unclear LME nickel price trend, but a small portion of traders took the opportunity to replenish stocks at low prices. At present, downstream consumption was still quiet, and pre-holiday stock replenishment did not occur. Jinchuan nickel prices were relatively firm, due to support from Jinchuan Group’s ex-works nickel prices, while Russian nickel prices were not as firm as Jinchuan nickel price.

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