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SMM Daily Review - 2011/9/29 Base Metal Market
Sep 30,2011 09:44CST
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SHFE 1112 copper contract prices directly opened at the daily limit-down of RMB 51,580/mt on Thursday, and SHFE 1112 aluminum contract gapped over 2% lower at RMB 16,160/mt.

SHANGHAI, Sept. 30 (SMM) –

Due to overnight slumps, LME copper prices Thursday rapidly fell below USD 7,000/mt after the opening, and touched a low at USD 6,820/mt. As a result, SHFE 1112 copper contract prices, the most active one, directly opened at the daily limit-down of RMB 51,580/mt on Thursday. After the opening, overnight shorts closed positions for profit-taking, helping SHFE three-month copper contract prices increase above the RMB 51,580/mt mark. However, as buying from short-term speculators was limited, and since the Shanghai Composite Index continued to slump by more than 1%, SHFE three-month copper contract prices only moved around RMB 52,300/mt during the whole trading day, fluctuating by about RMB 1,000/mt. SHFE 1112 copper contract prices finally ended the day at RMB 52,600/mt, down RMB 2,280/mt, or a loss of 4.15%. Positions for SHFE 1112 copper contracts were down 36,454 lots and trading volumes were down 220,000 lots, while positions for all SHFE copper contracts were down 41,248 lots. Both longs and shorts were cautious towards trading for risk aversion before China’s National Day holiday. Friday would the last trading day before the holiday, and SHFE copper prices were expected to rise at first and then fall.

In the spot market, copper offers increased to premiums of positive RMB 100-150/mt, since SHFE copper prices opened significantly down following slumps in LME copper prices Thursday morning, and market transactions were relatively brisk at the lows. As LME copper prices returned around USD 7,000/mt, SHFE copper prices failed to rally. However, cargo-holders were eager to move goods for cash generation and all cut price offers, causing standard and high-quality copper to trade at slight discounts during major trading hours. Spot copper offers already fell to discounts of negative RMB 100-0/mt near the midday. Traded prices for standard-quality copper were between RMB 52,300-52,800/mt in the morning business, and RMB 52,400-53,000/mt for high-quality copper. Risk aversion sentiment before China’s National Day holiday, a lack of confidence, as well as increasing cash flow and technical pressures all made transactions more difficult. SHFE copper prices remained weak in the afternoon session, and spot copper offers turned into discounts across the board, while traded prices already fell below RMB 53,000/mt, keeping market transactions lackluster. 

The most active SHFE 1112 aluminum contract gapped over 2% lower at RMB 16,160/mt on September 29th due to reignited investor worries towards a default by Greece. The contract was pressed to an intraday low of RMB 16,020/mt by increased short selling during early trading hours, but rebounded later to hit RMB 16,570/mt with bargain hunting by the longs and profit-taking by the shorts. At the tail of trading, due to profit-taking by the longs, the most active contract slightly slipped to finally close at RMB 16,475/mt, down RMB 60/mt or 0.36% from previous trading day. Positions of the contract decreased 2,020 lots to 104,338 lots. With strong support at the RMB 16,000.mt mark, the most active SHFE aluminum contract rebounded to above the 5-day moving average during the day. As most longs and shorts will exit the market for risk aversion on the following and last trading day before the National Day holiday, the most active aluminum contract is expected to test RMB 16,500/mt on September 30th.

Traded prices of spot aluminum in Shanghai were between RMB 16,920-16,950/mt on September 29th, with premiums of RMB 200-220/mt over the SHFE current-month aluminum price. In the morning, after SHFE aluminum prices gapped over 2% lower, spot aluminum prices plunged in response. Since traders were gradually exiting the market, spot aluminum supply dropped significantly. Meanwhile, due to low stock levels among traders, spot premiums were held steady above RMB 200/mt. Downstream purchases were also quite limited, therefore transactions were rarely seen. In the afternoon, with a strong rebound in SHFE aluminum prices, spot aluminum prices also climbed to RMB 17,000/mt. As most traders already exited the market before the National Day holiday, market supply turned even tighter. However, no transaction was seen in the market since downstream buyers and middlemen did not accept aluminum prices at the moment.


On Thursday, SHFE lead prices opened lower at RMB 13,895/mt, and then dipped to RMB 13,590/mt, a new low since lead futures contract was launched. Later the day, SHFE lead prices rallied to RMB 14,050-14,250/mt, and finally closed at RMB 14,360/mt, down RMB 145/mt. Trading volumes increased by 80 lots to 1,702 lots, while total positions decreased by 326 lots to 2,586 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 14,100-14,180/mt, with premiums of RMB 50/mt against SHFE 1111 lead contract prices. In the afternoon, premiums narrowed to RMB 30/mt against SHFE 1111 lead contract prices, with traded prices between RMB 14,230-14,270/mt. Downstream buyers were actively building stocks ahead of the National Day holiday, while traders were also selling goods to generate cash at the end of the month, keeping transactions brisk.

On Thursday, SHFE three-month zinc contract prices opened lower at RMB 14,130/mt, a new low for the year, then rallied tracking LME zinc prices overnight to close at RMB 14,685/mt, down RMB 260/mt, or down 1.74%. Trading volumes decreased by over 20,000 lots to 525,820 lots, and total positions decreased by 17,440 lots to 197,216 lots.
In domestic spot markets, #0 zinc was traded between RMB 14,500-14,550/mt, with premiums of RMB 0-50/mt against SHFE 1112 zinc contract prices. #1 was traded between RMB 14,450-14,500/mt. Downstream buyers were actively purchasing at lower prices. Spot prices were close to SHFE 1112 zinc contract prices in the afternoon as SHFE zinc prices rose, rising to RMB 14,600/mt. Downstream buyers were building stocks ahead of the National Day holiday, leaving transactions brisk.

Spot tin prices in Shanghai were little changed on September 29th. Mainstream tin brands during the day were Yunxi, Yunshan and Yunheng, with mainstream traded prices of RMB 181,000-182,500/mt. Small volumes of Nanshan branded tin was also seen in the market, which traded between RMB 179,000-180,000/mt. Overall market transactions were sparse as downstream buyers were cautious towards future tin prices and therefore stood on sidelines. Both supply and demand was weak in the market, and tin price is expected to remain stable during this last trading day before the National Day holiday.

On Wednesday, LME nickel prices opened at USD 18,105/mt and closed at USD 18,000/mt, down USD 1,047/mt from a day earlier, with the highest price at USD 18,950/mt and the lowest price at USD 18,000/mt. On Thursday, LME nickel prices advanced to hit a high of USD 18,649/mt after opening at USD 18,105/mt during the Asian trading hours. Wait-and-see sentiment was relatively strong before result of Germany’s vote over expansion of bailout fund. Although LME nickel prices advanced, overall trading volumes were still at low level, an indication of cautious transactions. LME nickel inventories were 97,164 mt, down 126 mt.

In the Shanghai nickel spot market, although LME nickel prices advanced, limited trading volumes still failed to boost transactions. Coupled with guidance from Jinchuan Group’s ex-works price at RMB 139,000/mt, spot nickel prices did not receive upward momentum. Mainstream traded prices of nickel from Russia were in the RMB 139,000-139,500/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 140,000-140,500/mt range. Overall trading sentiment was relatively quiet, largely due to traders’ wait-and-see sentiment and sluggish downstream consumption.


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