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SMM Daily Review – 2011/10/18 Base Metals Market
Oct 19,2011 09:33CST
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Source:SMM
As LME copper prices overnight fell by more than 1%, SHFE 1112 copper contract prices, the most active one, opened RMB 890/mt lower at RMB 55,250/mt on Tuesday.

SHANGHAI, Oct. 19 (SMM)--

Copper:
As LME copper prices overnight fell by more than 1%, SHFE 1112 copper contract prices, the most active one, opened RMB 890/mt lower at RMB 55,250/mt on Tuesday. As Chinese stock markets suffered great resistance during the whole trading day and lost 2,400 points, and since LME copper prices remained weak, SHFE three-month copper contract price trends failed to improve. China's National Bureau of Statistics (NBS) Tuesday morning announced China's GDP data for the third quarter, which was within market expectations and eased the declining pace of SHFE copper prices. At the tail of trading, Chinese stock markets fell below the 10-day moving average, and LME copper prices lost USD 7,300/mt, dragging down SHFE three-month copper prices to an intraday low of RMB 53,680/mt after falling below the RMB 54,000/mt mark. Finally, SHFE 1112 copper contract prices closed at RMB 54,000/mt, down RMB 2,140/mt or 3.81%. Positions for SHFE 1112 copper contracts were down 26,612 lots, and trading volumes were down 1,194 lots, while positions and trading volumes for SHFE 1201 copper contracts were up 47,086 lots and 157,000 lots respectively, highlighting the shift of the most actively-traded copper contracts. The handover rate remained as high as 215%, and short investors came to dominate the market again, with the 5-day moving average becoming the resistance.    

In the spot market, cargo-holders significantly pushed up copper premiums to positive RMB 250-350/mt from RMB 200-300/mt in the morning business, as SHFE copper prices slumped by 3%, and since losses for imported copper gradually increased due to the falling SHFE/LME copper price ratio. Traded prices for standard-quality copper were between RMB 54,900-55,100/mt in the morning business, and RMB 55,000-55,300/mt for high-quality copper. Previously hedged copper came on the market, and cargo-holders of domestic copper were also active moving goods for cash generation given higher copper premiums, keeping overall market supply very ample. Downstream producers made purchases on an as-needed basis, while speculators had no profit room on account of higher copper premiums, resulting in moderate market transactions. SHFE copper prices remained weak in the afternoon session, and spot copper premiums rose again to between positive RMB 300-450/mt. Traded prices were held firm with the morning levels, and some cargo-holders believed premiums would increase further Wednesday, causing supply of high-quality copper to contract compared with the morning business.     

Aluminum:    
The most active SHFE 1112 aluminum contract gapped lower at RMB 16,570/mt on October 18th after Germany denied a final solution deadline for the euro zone debt crisis. Due to strong short selling, the contract plunged over 2% to RMB 16,320/mt after its opening, and narrowed losses with profit-taking by the shorts in the afternoon to finally close at RMB 16,400/mt, down RMB 285/mt or 1.71% from previous trading day. Positions of the contract increased 2,164 lots to 94,396 lots. Transactions during the day broke through 50,000 lots for the first time following the National Day holiday due to strong short selling. With a bearish economic outlook, the most active SHFE aluminum contract is expected to stay below RMB 16,500/mt in the short term.

Mainstream traded prices of spot aluminum in Shanghai were between RMB 16,530-16,560/mt on October 18th, with premiums of RMB 50-80/mt over the SHFE current-month aluminum price.

In the morning, after SHFE aluminum prices plunged nearly 2%, spot aluminum prices dropped to near RMB 16,500/mt. The selling interest also cooled among goods holders. Despite this drop, downstream buyers stayed on the sidelines. Spot premiums over the current-month aluminum contract only fluctuated near RMB 50/mt following a change in month. That compared with surges in premiums during previous changes in month. Only middlemen were actively inquiring at lower prices, but transactions were quite limited.

In the afternoon, as market players expected only a slight dip in aluminum prices after SHFE aluminum prices narrowed losses, some middlemen stocked up at lower prices. However, most goods holders were still standing on the sidelines. The sparse quotations in the afternoon were between RMB 16,540-16,560/mt, at zero premiums over the SHFE current-month aluminum prices. Market transactions were rarely seen due to limited market supply and weak demand.

Lead:
On Tuesday, SHFE lead prices opened lower at RMB 14,725/mt, dragged down by LME lead prices overnight, then continued to fall. China's GDP dropped for the third quarter, despite industry data improved. As a result, SHFE lead prices met resistance at the 10-day moving average, and closed at RMB 14,420/mt, down RMB 620/mt, or a drop of 4.12%. Trading volumes increased by 140 lots to 632 lots, and total positions decreased by 220 lots to 1,486 lots.
In domestic spot markets, spot prices were RMB 50/mt higher than SHFE 1111 lead contract prices. Well-known brands such as Nanfang, Chengyuan, Shuikoushan and Yubei were quoted around RMB 14,650/mt, with transactions quiet. The brand Chihong Zn & Ge was quoted around RMB 14,670/mt, with quotations of the Gejiu brand rarely reported. In the afternoon, spot prices were between RMB 14,600-14,650/mt, with premiums unchanged at RMB 50/mt against SHFE 1111 lead contract prices. Smelters were holding goods at lower prices, keeping goods supply limited in the market. Downstream buyers purchased modestly, leaving transactions muted.

Zinc:
On Tuesday, SHFE 1112 zinc contract prices opened lower at RMB 15,080/mt tracking LME zinc prices overnight, and plunged to RMB 14,705/mt, finding support to move between RMB 14,600-14,700/mt. As China's GDP for the third quarter was 9.1%, in line with market speculations, implying China will continue tightening monetary policies by the yearend. As a result, SHFE zinc prices fell further to close at RMB 14,515/mt, down RMB 790/mt, or down 5.16%. Trading volumes increased by 180,000 lots to 373,154 lots, and total positions increased by 1,402 lots to 183,340 lots.
In domestic spot markets, #0 zinc was traded between RMB 14,850-14,900/mt, with premiums of RMB 150-200/mt against SHFE 1112 zinc contract prices. #1 zinc was traded between RMB 14,800-14,850/mt. Arbitragers had low goods at hand despite high premiums, while smelters were holding goods, leaving good supply available in the market limited. In this context, transactions were quiet despite downstream buyers were actively replenishing inventories at lower prices.

Tin:
The lowest traded price of Shanghai spot tin dropped below RMB 180,000/mt on October 18th as disappointing performance of LME tin during recent two days' trading damped goods holders' confidence to hold prices. Mainstream tin brands during the day were Yunxi, Yunxiang, Nanshan, Kaiyuan and Feidie, which mainly traded between RMB 179,000-184,000/mt. Some smelters lowered their quotations to lure buyers, but ended in failure. A few traders even moved goods below their cost so as to reduce risks when tin prices drop further. The wait-and-see sentiment strengthened among downstream enterprises amid continuously slipping prices, with transactions during this week's trading falling from the previous week. Domestic tin prices may continue the downward move in the short term due to sparse transactions.

Nickel:
On Tuesday, SHFE 1112 zinc contract prices opened lower at RMB 15,080/mt tracking LME zinc prices overnight, and plunged to RMB 14,705/mt, finding support to move between RMB 14,600-14,700/mt. As China's GDP for the third quarter was 9.1%, in line with market speculations, implying China will continue tightening monetary policies by the yearend. As a result, SHFE zinc prices fell further to close at RMB 14,515/mt, down RMB 790/mt, or down 5.16%. Trading volumes increased by 180,000 lots to 373,154 lots, and total positions increased by 1,402 lots to 183,340 lots.
In domestic spot markets, #0 zinc was traded between RMB 14,850-14,900/mt, with premiums of RMB 150-200/mt against SHFE 1112 zinc contract prices. #1 zinc was traded between RMB 14,800-14,850/mt. Arbitragers had low goods at hand despite high premiums, while smelters were holding goods, leaving good supply available in the market limited. In this context, transactions were quiet despite downstream buyers were actively replenishing inventories at lower prices.
 

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