SMM Daily Review - 2011/10/19 Base Metals Market

SHANGHAI, Oct. 20 (SMM) --
Copper:
As LME copper prices overnight narrowed losses, SHFE 1112 copper contract prices opened RMB 260/mt higher at RMB 54,810/mt on Wednesday. After the opening, SHFE three-month copper contract prices met resistance after briefly reaching to a high of RMB 55,300/mt, and then long and short investors severely struggled at the RMB 55,000/mt level. Near the closing time of midday, Shanghai rubber on the Shanghai Futures Exchange took a lead in declines, sliding by 5%, causing SHFE three-month copper contract prices to fall by nearly RMB 500/mt. In the afternoon session, as the Shanghai Composite Index was pressured at 2,400 points and short investors took the opportunity to enter into the market, and since LME copper prices already fell below the support of 10-day moving average, SHFE three-month copper contract prices declined to a low of RMB 53,870/mt after sliding below the RMB 54,000/mt mark. However, SHFE three-month copper contract prices narrowed losses at the tail of trading after short investors reported profit-taking. Finally, SHFE 1112 copper contract prices closed at RMB 54,300/mt, down RMB 250/mt or a loss of 0.46%. Positions for SHFE 1112 copper contracts were down 33,900 lots and trading volumes were down 116,000 lots, while positions and trading volumes for SHFE 1201 copper contracts were up 30,630 lots and 271,000 lots, completing the shift of the most actively-traded copper contracts. SHFE copper prices remained weaker than LME copper prices, with the 5- and 10-day moving averages becoming the recent new technical resistance.       

In the spot market, as SHFE copper prices slightly rebounded, copper premiums narrowed compared with the previous trading day, reporting between positive RMB 150-250/mt. Traded prices for standard-quality copper were between RMB 55,300-55,450/mt in the morning business, and RMB 55,350-55,600/mt for high-quality copper. Spot copper supply contracted compared with a day earlier since some hedged copper was locked. Downstream producers’ purchasing interest weakened following the bargain hunting at low prices on the prior day, and market transactions were mainly arbitrage transactions made by speculators in the morning business. In the afternoon session, SHFE copper prices slipped by RMB 100/mt, helping spot copper premiums to increase to between positive RMB 300-450/mt, while mainstream traded prices were between RMB 54,650-55,100/mt. Speculators’ operating interest fell due to limited arbitrage room in the afternoon session, keeping market transactions limited.     

Aluminum:
The most active SHFE 1112 aluminum contract opened slightly higher at RMB 16,450/mt on October 19th. After struggling near RMB 16,500/mt, the contract slipped to an intraday low of RMB 16,370/mt in the afternoon as shorts dominated the market. At the tail of trading, due to profit-taking by the shorts, the contract slightly rebounded and finally closed at RMB 16,435/mt, up RMB 20/mt or 0.12% from previous trading day. Total positions of the contract increased 6,542 lots to 87,854 lots. Transactions of the contract decreased over 30% from previous trading day as investors were cautious towards the global economy. SMM expects the contract to test support at RMB 16,400/mt in the short term.

Traded prices of spot aluminum in Shanghai were between RMB 16,600-16,660/mt on October 19th, with premiums of RMB 10-30/mt over the SHFE current-month aluminum price.

In the morning, spot aluminum prices climbed with a slight rebound in SHFE aluminum prices. However, as downstream demand remains weak, spot premiums over the SHFE current-month aluminum prices narrowed further. Goods holders were standing on the sidelines due to uncertain aluminum price trends. Goods movements were rare. Market transactions were quite limited as sellers and buyers diverged on prices.

In the afternoon, after SHFE aluminum plunged erasing morning gains, goods holders began holding goods. Therefore spot tin prices stayed above RMB 16,600/mt, with premiums over the SHFE current-month aluminum price slightly widening. Market transactions were sparse due to the strong wait-and-see sentiment among downstream buyers.

Lead:
On Wednesday, SHFE 1112 lead contract became the most actively traded, with prices opening at RMB 14,660/mt then moving between RMB 14,540-14,620/mt. Dragged down by LME lead prices and domestic stock markets, SHFE lead prices fell RMB 100/mt to move between RMB 14,370-14,500/mt, and finally closed at RMB 14,470/mt, down RMB 110/mt. Trading volumes decreased by 124 lots to 880 lots, and total positions decreased by 46 lots to 2,020 lots.

In domestic spot markets, the brand Chihong Zn & Ge was quoted between RMB 14,700-147,100/mt, with premiums of RMB 100-110/mt against SHFE 1111 lead contract prices. Other brands such as Yubei, Jinguan, Nanfang and Hanjiang were initially quoted around RMB 14,650/mt, and with prices rising to RMB 14,700/mt later the day. Quotations of the Gejiu brand were rarely reported. In the afternoon, SHFE lead prices fell further by RMB 100/mt, with spot prices between RMB 14,630-14,650/mt, RMB 100/mt higher than SHFE 1111 lead contract prices. Smelters were holding goods at lower prices, giving support to spot prices and causing premiums to expand. Traders had some goods at hand after delivery, while downstream buyers purchased at lower prices, causing transactions to improve.

Zinc:
On Wednesday, SHFE three-month zinc contract prices opened at RMB 14,725/mt, moving between RMB 14,650-14,750/mt in the morning session. As LME zinc prices plunged at noon, SHFE three-month zinc contract prices plummeted to an intraday low RMB 14,485/mt at a time. Finally, SHFE three-month zinc contract prices closed at RMB 14,590/mt, down RMB 115/mt, or down 0.78%. Trading volumes increased by nearly 20,000 lots to 265,568 lots, and total positions decreased by 4,726 lots to 183,778 lots.

In domestic spot markets, #0 zinc was traded between RMB 14,850-14,900/mt, with premiums between RMB 150-180/mt against SHFE 1201 zinc contract prices. #1 zinc was traded between RMB 14,800-14,850/mt. Goods supply available in the market was low, so transactions were not as brisk as the previous day despite strong downstream buying interest. Spot premiums rose to RMB 200/mt against SHFE 1201 zinc contract prices, with traded prices between RMB 14,750-14,800/mt.

Tin:
Shanghai spot tin prices continued to drop on October 20th as LME tin and market demand remained weak. Most tin brands had dropped below RMB 180,000/mt during the day’s trading. Yunheng, Yunxiang, Nanshan and Kaiyuan etc. branded tin was traded between RMB 178,000-179,500/mt. Only Yunxi and Tianti branded tin was held steady above RMB 180,000/mt and mainly traded between RMB 180,000-183,500/mt. Most smelters were still holding goods due to low prices. Downstream enterprises did not show more interest despite continuously falling prices, with most of them purchasing as needed. Secondary tin producers reduced their output due to high prices as well as tight supply of tin scrap. Secondary tin was not seen in the Shanghai tin market for months already.  

Nickel:
On Wednesday, LME nickel market opened at USD 18,800/mt and closed at USD 19,163/mt, up USD 308/mt from a day earlier, with the highest price at USD 19,200/mt and the lowest price at USD 18,550/mt. On Wednesday, LME nickel prices fluctuated narrowly around USD 19,000/mt after opening at USD 19,001/mt during the European trading hours, as market sentiment was still weighed by unsolved European debt crisis. LME nickel prices remained fluctuation trend. LME nickel inventories were 894,378 mt, down 960 mt from a day earlier.

In the Shanghai nickel spot market, traded prices were flat from a day earlier. Mainstream traded prices of nickel from Russia were around RMB 138,000/mt, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 139,500-140,000/mt range. When LME nickel prices slipped during the afternoon trading hours, transactions in spot market was negatively affected, with deals largely made during the morning trading hours. The current stagnant movement and dim outlook of LME nickel prices weighed traders’ sentiment. Given the relatively quiet downstream demand, deals were largely made among traders, with few downstream consumers entering market.