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SMM Daily Review - 2011/9/27 Base Metal Market
Sep 28,2011 09:41CST
price review forecast
SHFE 1112 copper contract prices opened up RMB 510/mt at RMB 55,550/mt on Tuesday, and SHFE 1112 aluminum contract opened higher at RMB 16,385/mt.

SHANGHAI, Sept. 28 (SMM) –

As LME copper prices stopped falling and began to rally on the previous trading day, SHFE 1112 copper contract prices, the most active one, opened up RMB 510/mt at RMB 55,550/mt on Tuesday. After the opening, reduction in position holdings by shorts a day earlier pushed up SHFE three-month copper contract prices to an intraday high of RMB 55,900/mt, but longs’ wait-and-see stance kept price movements weak. Later, SHFE three-month copper contract prices dropped to RMB 55,000/mt and then followed LME copper prices to fluctuate widely, with a low reaching at RMB 54,320/mt. In the afternoon session, LME copper prices returned above USD 7,400/mt, and the Shanghai Composite Index closed nearly 1% higher. As some longs entered into the market, SHFE three-month copper contract prices tried to move towards the daily high of RMB 55,900/mt. However, on account of large-scale position closings by short-term longs, SHFE three-month copper contract prices slid after touching RMB 55,760/mt. Finally, SHFE 1112 copper contract prices closed at RMB 55,040/mt, down slightly and flat with the settlement price on the prior day. Positions for SHFE 1112 copper contracts were down 10,228 lots, while trading volumes were up 305,000 lots. SHFE three-month copper contract prices Tuesday experienced corrections following significant declines, but longs mainly made intraday operations due to cautious sentiment. Therefore, SMM held pessimistic attitudes towards future copper prices.

In the spot market, SHFE copper prices experienced volatilities along with LME copper prices, and a rally in LME copper prices in the morning business helped improve market sentiment and promote bargain-hunting. In this context, copper premiums were firm between positive RMB 150-250/mt. However, panic sentiment was growing again when SHFE copper prices began to fall, and cargo-holders increased sell-offs. As a result, copper premiums fell rapidly, falling to positive RMB 80-150/mt near the midday. Daily traded prices for standard-quality copper were between RMB 55,100-55,600/mt, and RMB 55,150-55,800/mt for high-quality copper. Market transactions increased at first, and then fell. SHFE copper prices fell after initially rising in the afternoon session, while spot copper premiums held firm between positive RMB 50-150/mt. Traded prices were nearly unchanged from the morning levels, but market transactions were muted. 


Following a three-day decline in SHFE aluminum prices, short selling cooled on September 27th, with the most active SHFE 1112 aluminum contract opening higher at RMB 16,385/mt and struggling at the daily moving average in the morning driven by profit-taking by the shorts. In the afternoon, the contract maintained gains at above 2% supported by bargain hunting by the longs, and finally closed at RMB 16,530/mt, up RMB 260/mt or 2.23% from previous trading day. Positions of the contract decreased 8,056 lots to 109,846 lots. Supported by exiting short capital, the most active aluminum contract fixed the gap in the morning on previous trading day. It also showed stronger stability compared with other base metals. However, due to a lack of further support, the contract is expected to encounter strong resistance at the RMB 16,600/mt mark.

Mainstream traded prices of spot aluminum in Shanghai were between RMB 17,080-17,120/mt on September 27th, with premiums of RMB 150-230/mt over the SHFE current-month aluminum price. In the morning, the most active SHFE aluminum contract opened higher and narrowly fluctuated. The current-month aluminum contract’s several attempts to break through the RMB 17,000/mt mark helped spot aluminum price climb to RMB 17,100/mt. However, after the current-month aluminum current trimmed gains, downstream stock building interest lowered. As a result, a few traders with urgent liquidating needs actively lowered their quotations, dragging down mainstream traded prices. Overall market transactions were moderate. In the afternoon, after SHFE aluminum prices widened gains, goods holders became unwilling to move goods. Inquiries and purchases from downstream and middlemen were also sparse. Mainstream traded prices in the afternoon were RMB 17,080-17,100/mt. As the National Day holiday approaches, market players were gradually exiting the market.

Supported by the rebound in LME tin prices, domestic tin prices climbed to RMB 179,500-182,000/mt in the afternoon on September 27th. Mainstream tin brands during the day were Yunxi, Yunheng, Yunshan, Jinlong and Kaiyuan etc. The unexpected rebound in LME tin prices also boosted some domestic smelters’ enthusiasm to move goods. For instance, Jiangxi tin brands which were not seen on previous trading day appeared in the market. However, most smelters were still unwilling to move goods, with no significant increase seen in market supply. LME tin prices climbed due to concerns that supply from Indonesia may drop, but market players suspect it is only a speculative rumor, and therefore remain cautious towards tin prices during the National Day holiday.

On Tuesday, SHFE lead contract prices opened higher at RMB 14,205/mt, and then fluctuated around the moving average. In the afternoon, SHFE lead prices touched RMB 14,545/mt but fell to close at RMB 14,385/mt, up RMB 755/mt, or up 5.54%. Trading volumes decreased by 1,276 lots to 2,360 lots, and total positions decreased by 90 lots to 3,152 lots.
In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 14,250-14,300/mt, close to SHFE 1111 lead contract prices. In the afternoon, spot prices rose to RMB 14,400/mt along with SHFE lead prices. The market was still cautious as prices stabilized, keeping transactions quiet.

On Tuesday, SHFE three-month zinc contract prices opened higher at RMB 14,925/mt, boosted by LME zinc prices overnight, touching RMB 15,000/mt in the morning trading but falling immediately below the moving average. In the afternoon, SHFE three-month zinc contract prices rallied to RMB 15,000/mt, driven up by the Shanghai Composite Index, with prices finally closing at RMB 14,975/mt, up RMB 185/mt. Trading volumes decreased by nearly 40,000 lots to 544,936 lots, and total positions decreased by 14,010 lots to 216,132 lots.
In domestic spot markets, #0 zinc was traded between RMB 14,850-14,900/mt, with discounts between negative RMB 20-30/mt against SHFE 1112 zinc contract prices. #1 zinc was traded around RMB 14,850/mt. Downstream buyers were still cautious ahead of China’s National Day holiday.

On Monday, LME nickel prices opened at USD 18,400/mt and closed at USD 18,214/mt, up USD 14/mt from a day earlier, with the highest price at USD 18,625/mt and the lowest price at USD 17,150/mt. On Tuesday, LME nickel prices fluctuated higher and hit a high of USD 18,797/mt after opening at USD 18,500/mt during the Asian trading hours, boosted by interest rate reduction and implementation of additional Euro 2 trillion bailout plan in Europe. However, price growth was still capped by concern over economic outlook. LME nickel inventories were 97,458 mt, up 318 mt.

In the Shanghai nickel spot market, spot nickel prices were inspired by LME nickel price advance. Mainstream traded prices of Russian nickel were in the RMB 138,000-139,000/mt rang and mainstream traded prices of Jinchuan nickel were around RMB 140,500/mt. Although supply of goods was ample in the market, downstream producers still made purchases on an as-needed basis due to lack of pre-holiday stock replenishment. Overall transactions were moderate on Tuesday, as market players were still cautious amid unclear LME nickel price trend.

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