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SMM Daily Review – 2011/9/22 Base Metals Market
Sep 23,2011 09:50CST
price review forecast
As LME copper prices lost USD 8,100/mt after the opening, SHFE 1112 copper contract prices, the most active one, opened down RMB 1,010/mt at RMB 61,480/mt on Thursday.

SHANGHAI, Sept. 23 (SMM)--

As LME copper prices lost USD 8,100/mt after the opening, SHFE 1112 copper contract prices, the most active one, opened down RMB 1,010/mt at RMB 61,480/mt on Thursday. After the opening, SHFE three-month copper contract prices experienced a wave of panic declines, falling to a low of RMB 59,370/mt after breaking RMB 60,000/mt. Following these declines, buying support helped SHFE three-month copper contract prices return to RMB 60,850/mt and then fluctuate around the price mark. However, the rebound was limited due to overshadowed bearish sentiment, with the high-end price failing to exceed the opening price of RMB 61,480/mt. In the afternoon session, the Shanghai Composite Index slumped by nearly 2.78%, dropping to near the opening level of 2,440 points on the previous trading day. As a result, SHFE 1112 copper contract prices were pressured at the daily moving average, and finally closed at RMB 60,260/mt, down RMB 2,230/mt, or a loss of 3.57%. Positions for SHFE 1112 copper contracts were up 14,424 lots, and trading volumes were significantly up 59,192 lots. Without support from the macro-economic front, positive news, demand side and technical indicators, copper markets were expected to extend the losses.      

In the spot market, as SHFE copper prices continued to slump by more than 3%, cargo-holders pushed up copper premiums, which were initially reported between positive RMB 80-180/mt. SHFE copper prices plummeted again at the tail of trading in the morning business, losing RMB 61,000/mt, which helped copper premiums increase to positive RMB 120-250/mt. Since copper prices were on a downside track, all market participants chose to stand on the sidelines. Traded prices for standard-quality copper were between RMB 61,100-61,700/mt in the morning business, and RMB 61,150-61,850/mt for high-quality copper. Spot copper supply remained ample, while market transactions rose at first, and then fell. SHFE copper prices continued to slip in the afternoon session, but market consumption remained quiet. As a result, copper premiums failed to rise, reporting between positive RMB 120-220/mt. Traded prices already fell between RMB 60,800-61,300/mt, and market transactions stayed weak.

Most active SHFE aluminum contract was changed to 1112 on September 22nd, and opened lower at RMB 17,005/mt in the morning. The contract dropped to an intraday low of RMB 16,860/mt later due to falling stock prices and strengthening US dollar, and finally closed at RMB 16,980/mt, down RMB 120/mt or 0.7% from previous trading day. Positions of the contract increased 8,822 lots to 107,680 lots. SMM expects SHFE aluminum prices to maintain a downward trend in the short term given strengthening US dollar and worsening debt issues in Europe.

Traded prices of spot aluminum in Shanghai were between RMB 17,500-17,540/mt on September 22nd, with premiums of RMB 120-160/mt over SHFE current-month aluminum price. Low-iron aluminum was traded between RMB 17,580-17,620/mt. Traded prices of spot aluminum in Wuxi were between RMB 17,500-17,520/mt. In the morning, most active SHFE aluminum contract changed to 1112 with a stabilizing price, and spot quotations were held stable in response. Middle men were active in the market, but downstream buying interest remained low. In the afternoon, as SHFE aluminum price slipped, no purchases was seen in the market. Market transactions during the day were moderate.

On Thursday, SHFE lead prices opened lower at RMB 15,690/mt, dragged down by LME lead prices overnight, and then dipped to RMB 15,020/mt, finding support at the RMB 15,000/mt level. Later the day, SHFE lead prices rose slightly to fluctuate between RMB 15,450-15,530/mt, and fell further to close at RMB 15,245/mt, down RMB 730/mt, or down 4.57%. Trading volumes increased by 400 lots to 950 lots, and total positions increased by 274 lots to 2,434 lots.

In domestic spot markets, spot prices were RMB 300/mt lower than the previous day. The brands such as Nanfang and Chihong Zn & Ge and Yuguang were quoted between RMB 15,350-15,400/mt, with discounts of negative RMB 50-100/mt against SHFE 1111 lead contract prices. In the afternoon, spot prices remained relatively unchanged compared to the morning session, with downstream buyers actively purchasing, causing transactions to improve.

SHFE three-month zinc contract prices opened lower at RMB 16,090/mt, plummeting to a new low for this year at RMB 15,400/mt in the morning session. Prices rallied later the day but met resistance at the RMB 16,000/mt level, fluctuating between RMB 15,900-16,000/mt during the day. Finally, SHFE three-month zinc contract prices closed at RMB 15,855/mt, down RMB 465/mt, or down 2.85%. Trading volumes increased by nearly 10,000 lots to 397,524 los, and total positions increased by 21,836 lots to 210,332 lots.

In domestic spot markets, mainstream traded prices of #0 zinc were between RMB 15,950-16,000/mt, with discounts between negative RMB 0-10/mt against SHFE 1111 zinc contract prices. #1 zinc was traded between RMB 15,900-15,950/mt. Downstream increased purchases as zinc prices fell, but goods supply available was low as smelters were holding goods.

Spot tin price in Shanghai further dropped on September 22nd as selling-off continued throughout the day due to plunging LME tin price. This was seen even among smelters who had been holding goods previously. Mainstream tin brands in the market included Yunxi, Yunheng and Nanshan, with traded prices of RMB 186,000-191,500/mt. Market transactions remained sparse as continuously plunging LME tin price led to stronger panic at downstream and as market consumption remained weak. Further more, the falling LME tin price led to higher import interest among some domestic buyers, therefore tin import is expected to continue, which can meet production needs but will weigh on domestic sales. Spot tin price therefore still has some downward space.

On Wednesday, LME nickel prices opened at USD 21,100/mt and closed at USD 21,066/mt, up USD 60/mt from a day earlier, with the highest price at USD 21,445/mt and the lowest price at USD 20,905/mt. On Thursday, LME nickel prices slipped to hit a low of USD 19,400/mt after opening at USD 20,300/mt during the Asian trading hours, owing to panic sell-offs in base metal market following Federal Reserve economy warning and disappointed economic data from China. Finally, LME nickel prices closed 4.7% lower from a day earlier. LME nickel inventories were 97,818 mt, up 180 mt. 

In the Shanghai nickel spot market, Jinchuan Group cut ex-works nickel prices by RMB 4,000/mt to RMB 153,000/mt. Spot nickel prices fell sharply along with LME nickel price slump. Coupled with price cut from Jinchuan Group, spot nickel slipped further. Transactions were largely done in the morning trading hours, and were quiet limited during the afternoon trading hours. Generally speaking, overall trading sentiment was extremely sluggish due to LME nickel price slump. During the morning trading hours, mainstream traded prices of nickel from Russia were in the RMB 152,000-152,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 154,000-154,500/mt range. Few deals were made in the afternoon trading hours, with some Russian nickel traded at RMB 150,500/mt.

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