SMM Daily Review - 2011/10/21 Base Metals Market

SHANGHAI, Oct. 24 (SMM) --

Copper:

As LME copper prices extended losses overnight, SHFE 1201 copper contract prices opened RMB 410/mt lower at RMB 50,760/mt last Friday. After the opening, SHFE three-month copper contract prices experienced significant volatilities before the midday. As short investors reported profit-taking and capitals came into the market, SHFE three-month copper contract prices climbed up and reached to an intraday high of RMB 52,480/mt, with the price gap between the low and high-end prices reaching nearly RMB 2,000/mt. However, as the resistance of RMB 52,500/mt in late September arrived, and since the Shanghai Composite Index continued to set new yearly lows, SHFE three-month copper contract prices fell rapidly. In the afternoon session, long and short investors continued to struggle severely at RMB 51,500/mt, causing SHFE three-month copper contract prices to fluctuate around the price mark. Finally, SHFE 1201 copper contract prices closed at RMB 51,670/mt, up RMB 500/mt or 0.98%. Positions for SHFE 1201 copper contracts were up 3,016 lots and trading volumes were up 704,000 lots. Short investors had more advantages against long investors, and the rebound of SHFE copper prices were merely price corrections following the steep declines on the previous trading day. Hence, SHFE copper prices would fall further for the foreseeable future.         

In the spot market, cargo-holders were positive towards future copper prices after SHFE copper prices opened lower, helping initial copper premiums rise to between positive RMB 600-700/mt. Nevertheless, as SHFE copper prices increased by more than RMB 2,000/mt, spot copper premiums fell slightly to positive RMB 450-550/mt. SHFE copper prices continued to fall significantly before the midday, and spot copper premiums returned to higher levels. Overall spot copper premiums were reported between positive RMB 500-700/mt in the morning business. Traded prices for standard-quality copper were between RMB 52,700-53,500/mt, and RMB 52,800-53,600/mt for high-quality copper. Due to volatilities in copper prices, market transactions kept cautious. Cargo-holders were active in moving goods for cash generation, resulting in sufficient market supply. In the afternoon session, SHFE copper prices fluctuated widely, and spot copper premiums stabilized at positive RMB 550-700/mt, but traded prices declined to RMB 52,500-53,100/mt, with speculators mainly making purchases. Copper inventories monitored by the Shanghai Futures Exchange were down 11,935 mt to 87,726 mt in the week ending October 21st, and spot copper market would probably support the low-end SHFE copper prices.

Aluminum:

The most active SHFE 1112 aluminum contract opened slightly lower at RMB 16,025/mt on October 21st as investors were cautious whether a final solution would come out from the EU Summit this weekend. The contract recovered losses during previous trading day amid profit-taking by shorts, and finally closed RMB 205/mt or 1.27% higher at RMB 16,290/mt after hitting an intraday high of RMB 16,350/mt. Positions of the contract decreased 4,766 lots to 78,294 lots. The most active SHFE aluminum contract closed higher for the first time following a 4-day drop this week, supported by profit taking by shorts. Transactions during the day, however, fell short of 40,000 lots. Whether Europe will return to the positive direction depends on the EU Summit during the weekend. The most active aluminum contract will slip further if no supportive measures are provided, possibly dropping below the RMB 16,000/mt mark.

Traded prices of spot aluminum in Shanghai were between RMB 16,480-16,520/mt on October 21st, with premiums of RMB 100-120/mt over the SHFE current-month aluminum price.

In the morning, spot aluminum trimmed gains after SHFE aluminum fell from the intraday high. Spot premiums over the SHFE current-month aluminum price, however, were held above RMB 100/mt by goods holders. Stock building demand was limited during the last trading day of the week. Market supply remained excessive. Transactions were moderate.

In the afternoon, the SHFE current-month aluminum price narrowly fluctuated above RMB 16,350/mt, spot premiums over the price held steady at RMB 100/mt. Spot aluminum was traded between RMB 16,450-16,480/mt. Market transactions were quite sparse as both sellers and buyers stood on the sideline due to the coming weekend.

Lead:

Last Friday, SHFE 1112 lead contract prices opened higher at RMB 13,850/mt, touching as high as RMB 14,600/mt at 2:00 pm. Finally, SHFE lead prices closed at RMB 14,235/mt, up RMB 380/mt, or up 2.9%. Trading volumes increased by 204 lots to 1,728 lots, and total positions increased by 100 lots to 2,354 lots.

In domestic spot markets, well-known brands such as Chihong Zn & Ge, Nanfang and Yubei were traded between RMB 14,350-14,400/mt, with premiums of RMB 120-180/mt against SHFE three-month lead contract prices. The market was cautious due to uncertainty of price trends, leaving transactions quiet.

Zinc:

Last Friday, SHFE three-month zinc contract prices opened higher at RMB 14,120/mt, and surged later the day as a large number of shorts left the market with profit-taking, and as the Shanghai Composite Index rebounded, but meeting resistance at RMB 14,300/mt level. In the afternoon, SHFE three-month zinc contract prices closed at RMB 14,300/mt, up RMB 375/mt, or 2.69%. Trading volumes decreased by 50,000 lots to 575,068 lots, and total positions decreased by 14,864 lots to 219,884 lots.

In domestic spot markets, #0 zinc was traded between RMB 14,350-14,400/mt, with premiums of RMB 200/mt against SHFE 1201 zinc contract prices in the morning, and with premiums narrowing to RMB 150/mt later the day. #1 zinc was traded between RMB 14,300-14,350/mt. Transactions were quiet due to a wait-and-see sentiment.

Tin:

Purchases from downstream increased significantly Last Friday morning after LME tin prices surged, helping Shanghai spot tin prices stay at the trading range on the previous trading day. Mainstream tin brands Yunheng, Yunxiang, Nanshan, Jinlong, Kaiyuan and Guangsheng were mainly traded between RMB 177,500-179,000/mt. Yunxi branded tin was traded at a higher range between RMB 181,500-182,000/mt. However, after LME tin prices fell from the intraday high, the wait-and-see sentiment turned strong in the Shanghai spot tin market. As for the present, downstream demand remained weak and transactions remained sluggish.

Nickel:

On Thursday, LME nickel prices opened at USD 18,550/mt and closed at USD 18,150/mt overnight, down USD 497/mt from a day earlier, with the highest price at USD 18,700/mt and the lowest price at USD 17,900/mt. On Friday, LME nickel prices fluctuated narrowly after opening at USD 18,300/mt during the Asian trading hours. Market sentiment remained cautious before the EU summit. Leaders from Germany and France stated that an agreement on expanding the euro zone bailout fund may be reached early next week, boosting market sentiment to certain extent. LME nickel inventories were 86,820mt, down 1,668 mt from a day earlier.

In the Shanghai nickel spot market, spot nickel prices fell further due to Thursday and Friday’s weak performance of LME nickel prices. Although Jinchuan Group’s ex-works prices remained firm at RMB 139,000/mt, traded prices in spot market were already lower than Jinchuan Group’s ex-works nickel prices due to weak demand in the market and from sluggish trading sentiment between cargo-holders. Mainstream traded prices of nickel from Russia were around RMB 134,000/mt, and mainstream traded prices of nickel from Jinchuan Group were around RMB 136,500/mt. Overall trading sentiment was still sluggish. Deals were largely done among traders, with few downstream consumers entering market.