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SMM Daily Review - 2011/9/23 Base Metal Market
Sep 26,2011 10:06CST
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As LME copper prices overnight slumped by nearly 9%, SHFE 1112 copper contract prices, the most active one, opened down RMB 3,080/mt at RMB 57,500/mt on Friday.

SHANGHAI, Sept. 26 (SMM) –

As LME copper prices overnight slumped by nearly 9%, SHFE 1112 copper contract prices, the most active one, opened down RMB 3,080/mt at RMB 57,500/mt on Friday. After the opening, SHFE three-month copper contract prices returned to RMB 58,400/mt due to profit-taking by the shorts. However, as the longs fled the markets after touching the stop-loss of RMB 55,000/mt, and since the Shanghai Composite Index lowered to test the support at 2,400 points after a down open, SHFE three-month copper contract prices slid constantly, with prices touching the daily limit-down of RMB 56,940/mt several times during trading hours and then fluctuating around the price mark. In the afternoon session, since LME copper prices continued to plummet and fell to USD 7,100/mt rapidly, all SHFE copper contract prices slid by their daily limit across the board. Finally, SHFE 1112 copper contract prices closed at RMB 56,940/mt, down RMB 3,640/mt or 6.01%. Positions for SHFE 1112 copper contracts were down 16,738 lots and trading volumes were down 79,446 lots. Overall positions for all SHFE copper contracts were also down, suggesting investors were eager to stay out of the market. Copper still fell into a bear market.     

In the spot market, as the international financial market plummeted, copper markets both at home and abroad tumbled, with SHFE copper prices touching the daily limit-down in the morning business, which provided profit opportunities for copper importers. Hedge traders reported profit-taking and were eager to move goods, helping copper premiums fall rapidly between positive RMB 250-300/mt from positive RMB 500/mt in the morning session and positive RMB 250-350/mt near the midday. Traded prices for standard-quality copper were between RMB 57,700-57,950/mt in the morning business, and RMB 57,750-58,000/mt for high-quality copper. Since copper markets slumped rapidly, there were fewer speculators making purchases during the whole trading day. However, some downstream producers made purchases at the lows due to stockpiling needs before the Chinese National Day holiday, while most of them chose to stay out of the market until a stable price trend was visible. In the afternoon session, SHFE copper prices slid by their daily limit across the board, and cargo-holders continued to make panic sell-offs due to pessimistic attitudes. Traded prices were near RMB 55,000/mt, and fewer market players made purchases. Copper prices monitored by the Shanghai Future Exchange (SHFE) were down 9,808 mt to 102,253 mt in the week ended September 23rd, suggesting cargo-holders of imported copper were eager to move goods.


Most active SHFE 1112 aluminum contract gapped lower by over 2% at RMB 16,705/mt on September 23rd due to plunges in global financial markets overnight. The contract slipped slightly in the morning, and fell to a stop with other base metals contracts in the afternoon due to an inrush of short capital. It repeated trading resumptions and stops during following trading hours, but rebounded slightly at the tail of trading on profit-taking by the shorts to finally close at RMB 16,495/mt, down RMB 495/mt or 2.91% from previous trading day. Positions of the contract increased hugely by 13,600 lots to 121,280 lots. Transaction volume of the contract also climbed to over 170,000 lots during the day. SMM expects most active SHFE aluminum contract to test RMB 16,000/mt in the short term. Latest SHFE aluminum stock decreased 10,537 lots to 99,479 lots, therefore the low warrant volume will provide certain support for SHFE aluminum prices.

Mainstream traded prices of spot aluminum in Shanghai were between RMB 17,050-17,090/mt on September 23rd, with premiums of RMB 80-150/mt over SHFE current-month aluminum price.

In the morning, after most active SHFE aluminum contract gapped lower by over 2%, SMM aluminum price plunged by RMB 450/mt in response. SHFE current-month aluminum price temporarily climbed to RMB 17,000/mt in the morning, which helped mainstream price gain, with spot premiums over the contract narrowing to within RMB 100/mt. The wait-and-see sentiment was strong among both suppliers and buyers. Therefore, only traders with sufficient capital moved goods at lower prices, which attracted some downstream enterprises to build up stocks at lower cost. However, as quotations rose later, transactions remained sparse.

In the afternoon, SHFE aluminum soon fell to a stop after its afternoon opening. Though it resumed trading later, its loss was maintained near 4%, and the spot aluminum market turned quiet as a result. The wait-and-see sentiment turned strong among both sellers and buyers. Goods holders became unwilling to move their goods due to limited supply, with only a few quotations at RMB 17,000/mt being reported, and most downstream buyers exited the market being bearish towards future aluminum prices, with no transactions being reached in the afternoon.

Last Friday, SHFE three-month zinc contract prices opened lower at RMB 15,450/mt, and plummeted to RMB 15,175/mt, then rebounded to an intraday high RMB 15,555/mt. In the afternoon, SHFE three-month zinc contract prices fell by the limit to RMB 14,980/mt, a new low for this year, and closed at RMB 15,055/mt, down 5.55%. Trading volumes increased by 192,740 lots to 590,264 lots, and total positions increased by 4,364 lots to 214,696 lots.

In domestic spot markets, #0 zinc was traded between RMB 15,300-15,350/mt in the morning session, and with prices rising to RMB 15,350-15,380/mt at noon, close to SHFE 1112 zinc contract prices. #1 zinc was traded between RMB 15,250-15,300/mt. Downstream buying interest was strong, with transactions brisk. Spot prices fell to RMB 15,000/mt in the afternoon along with SHFE zinc prices, leaving the market quiet.


Last Friday, SHFE 1111 lead contract prices opened lower at RMB 14,810/mt, dragged down by LME lead prices overnight, then fluctuated around the moving average. In the afternoon, SHFE lead prices dipped to RMB 14,470/mt and closed at that level, down RMB 775/mt, or down 5%. Trading volumes increased by 444 lots to 2,318 lots, and total positions decreased by 118 lots to 2,658 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 14,500-14,600/mt, close to SHFE 1110 lead contract prices, with prices around RMB 14,470/mt in the afternoon. Downstream buyers were cautious as they had built stocks at lower prices, and due to pressure from tight cash flow.


The panic selling of LME tin on September 22nd spread into domestic tin market on September 23rd. After dropping below the RMB 190,000/mt mark on September 22nd, domestic tin price further plunged to near RMB 180,000/mt during the following day. Mainstream traded prices for Yunheng, Yunshan and Nanshan etc. branded tin were between RMB 175,000-181,000/mt, with only small volumes of Yunxi branded tin being traded at RMB 189,000/mt. Market transactions during the day were sparse despite of plunging prices. As LME tin price plunged and showed a dropping trend, the wait-and-see sentiment became stronger among purchasers, and purchases were made only on an as-needed basis.

Last Thursday, LME nickel prices opened at USD 20,300/mt and closed at USD 17,000/mt, down USD 3,598/mt from a day earlier, with the highest price at USD 20,450/mt and the lowest price at USD 17,000/mt. Last Friday, LME nickel prices slipped to hit a low of USD 16,800/mt after opening at USD 18,100/mt during the Asian trading hours, but later pared certain losses from weaker US dollar. Very key economic data would be released on Friday night, and it was expected that LME nickel prices would try to pare losses made during the Asian trading hours. LME nickel inventories were 97,242 mt, down 576 mt. 

In the Shanghai nickel spot market, affected by Thursday’s LME nickel price plummet, offers of spot nickel were in the RMB 140,000-140,500/mt range in Friday's morning trading hours. As LME nickel prices continued to slip on Friday, traded prices of nickel from Russia were in the RMB 138,000-138,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 140,000-141,000/mt range. Out of market expectation, Jincuan Group did not cut ex-works nickel prices, so Jinchuan Group’s ex-works nickel prices limitedly support spot nickel prices. Coupled with growing wait-and-see sentiment along with LME nickel price tumble, overall transactions were lackluster.


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