SMM Daily Review - 2011/10/26 Base Metals Market

SHANGHAI, Oct. 27 (SMM) --

Copper:

As LME copper prices surrendered some gains overnight, SHFE 1210 copper contract prices, the most active one, opened RMB 700/mt lower at RMB 55,700/mt on Wednesday. After the opening, short and long investors struggled between RMB 56,000/mt, and Chinese stock markets later continuously rebounded by 1%. LME copper prices rallied to USD 7,700/mt, helping SHFE three-month copper contract prices climb to RMB 57,750/mt in the afternoon session, but with resistance at the 30-day moving average. As LME copper prices slid by nearly USD 100/mt, SHFE three-month copper contract prices fell to fluctuate around RMB 57,000/mt. Finally, the most actively-traded copper contract prices closed at RMB 57,230/mt, up RMB 830/mt or a gain of 1.47%. Positions for the most actively-traded copper contracts were up 19,954 lots, and trading volumes were up 36,526 lots. Long and short investors held divergent views before the EU summit was held, but short investors had more advantages, indicating growing overnight risks.
 
In the spot market, copper offers stabilized between premiums of positive RMB 200-300/mt, although SHFE copper prices moved higher after a low open. Traded prices for standard-quality copper were between RMB 57,100-57,350/mt, and RMB 57,200-57,550/mt for high-quality copper. Spot copper premiums held firm before the midday, since copper supply contracted significantly and investors were active in entering the market, despite wide fluctuations in SHFE copper prices. In the afternoon session, as SHFE copper prices moved at high levels, spot copper premiums fell slightly to between positive RMB 100-200/mt, while traded prices rose to between RMB 57,500-58,000/mt. Spot copper supply decreased again in the afternoon business, since some cargo-holders’ hedged copper was locked, but market transactions became weak, with speculators and downstream producers on the sidelines. 
 
Aluminum:
 
The SHFE 1201 aluminum contract became the most active aluminum contract on October 26th. China’s Prime Minister Wen Jiabao said on the previous day that the country’s macro economic policies need to be fine-adjusted at times appropriate, this helped strengthening investors’ confidence, with the Shanghai Composite Index consolidating at the 2,400 mark and further climbing. SHFE copper prices also climbed slightly during the day. SHFE aluminum prices, however, provided little response to the remarks, with the most active SHFE aluminum contract closing RMB 95/mt or 0.58% lower at RMB 16,360/mt during the day.
 
Transactions of the day contracted 65% to 40,000 lots, while positions of the contract increased 3,698 lots to 65,004 lots. Investors turned to contracts for delivery in a longer time due to weak fundamentals of the aluminum market. The limited price gaps among different contracts, however, had lost most investors of their interest for the metal. SMM expects the most active SHFE aluminum contract to struggle at RMB 16,300/mt before the direction is determined by results from the EU Summit.
 
Traded prices of spot aluminum in Shanghai were between RMB 16,380-16,440/mt on October 26th, with premiums of RMB 20-50/mt over the SHFE current-month aluminum price.
 
In the morning, the SHFE current-month aluminum price opened lower and narrowly fluctuated below RMB 16,400/mt. Though SHFE copper prices have been climbing during recent two days, aluminum prices are continuously falling. Spot aluminum supply remained excessive, its premiums over the SHFE current-month aluminum price, however, slightly widened as goods holders stuck to the RMB 16,400/mt mark. Market transactions were limited.
 
Spot aluminum prices slipped slightly to RMB 16,380-16,400/mt in the afternoon as transaction was hardly reached at the RMB 16,400/mt mark. The wait-and-see sentiment was strong in the afternoon.

Lead:

On Wednesday, SHFE lead prices opened RMB 200/mt higher at RMB 14,875/mt, and then moved between RMB 14,950-15,050/mt. In the afternoon, SHFE lead prices surged to RMB 15,195/mt along with domestic stock markets, with prices finally closing at RMB 15,015/mt, down RMB 80/mt. Trading volumes decreased by 1,570 lots to 970 lots, and total positions decreased by 60 lots to 1,978 lots.

In domestic spot markets, well-known brands such as Yuguang, Chihong Zn & Ge, Nanfang, Chengyuan and Jinli were quoted with premiums of RMB 50/mt against SHFE 1111 lead contract prices between RMB 15,100-15,200/mt. The brands such as Baiyin and Shuangyan were quoted around RMB 15,100/mt. Smelters increased goods supply due to higher prices, but traders purchased modestly. Goods supply available especially the Nanfang and Chihong Zn & Ge brands were limited, with downstream buyers purchasing on an as-needed basis, leaving transactions quiet.

Zinc:

On Wednesday, SHFE three-month zinc contract prices opened lower at RMB 14,750/mt, moving between RMB 18,450-14,950/mt in the morning session. In the afternoon, SHFE three-month zinc contract prices surged boosted by LME zinc prices overnight to touch RMB 15,175/mt, but met resistance and fell to the moving average, with prices finally closing at RMB 14,945/mt, down RMB 205/mt, above the 10-day moving average. Trading volumes decreased significantly by 370,000 lots to 583,648 lots, and total positions increased by 5,484 lots to 225,084 lots.

In domestic spot markets, #0 zinc was traded around RMB 15,000/mt, with premiums of RMB 50-70/mt against SHFE 1201 zinc contract prices. #1 zinc was traded around RMB 14,980/mt. The market was cautious due to price volatility, with transactions muted. Spot premiums narrowed to RMB 10-20/mt at noon, with quotations above RMB 15,100/mt, but transactions were quiet. 
 
 Tin:
 
Shanghai spot tin prices slipped on October 26th after LME tin prices dropped from the previous high. Mainstream tin brands during the day were Yunxi, Yunheng, Yunxiang and Nanshan, with traded prices mainly falling between RMB 181,000-183,000/mt. The wait-and-see sentiment strengthened again in the market, with traded volumes remaining limited. After domestic tin prices ended the recent and temporary climb, many smelters were holding goods. Downstream demand remained weak as tight credit supply and weak terminal consumption continued.

Nickel:

LME nickel prices advanced to hit a high of USD 20,200/mt after opening at USD 19,720/mt during the Asian trading hours on Wednesday. Market players doubted whether or not the EU summit would find out solution to the European debt crisis, which weighed on market sentiment. However, the weaker US dollar supported LME nickel prices to advance to certain extent. LME nickel inventories were 87,588 mt, down 240 mt from a day earlier.

In the Shanghai nickel spot market, although LME nickel prices advanced on Wednesday, uncertainties over the EU summit result continued to weigh on market sentiment, with most market players not optimistic towards outcome of the EU summit. Trading sentiment was sluggish in spot nickel market. Deals were largely done among traders, with few downstream consumers entering market. Mainstream traded prices of nickel from Russia were between RMB 139,500-140,000/mt, and mainstream traded prices of nickel from Jinchuan Group were between RMB 141,000-141,500/mt. The recent weak performance of LME nickel prices led to sluggish trading sentiment in the Shanghai nickel spot market.