SMM Daily Review - 2011/10/27 Base Metals Market

SHANGHAI, Oct. 28 (SMM) --  

Copper:

As LME copper prices closed with gains overnight, SHFE 1210 copper contract prices, the most active one, opened RMB 850/mt higher at RMB 57,680/mt on Thursday. After the opening, SHFE three-month copper contract prices met resistance at the 30-day moving average of RMB 58,000/mt before fluctuating at high levels near the daily moving average of RMB 57,500/mt. In the afternoon session, as LME copper prices inched higher, SHFE three-month copper contract prices drifted higher, breaking out the RMB 58,000/mt resistance and climbing as high as RMB 58,070/mt. Finally, the most actively-traded copper contract prices closed at RMB 58,040/mt, up RMB 1,210/mt or 2.13%. Positions for the most actively-traded copper contracts were up 2,848 lots, while trading volumes were down 178,000 lots, with some bulls keeping up with rising prices. SHFE copper prices would face resistance at RMB 58,000/mt over the near term, and would test RMB 59,000/mt reached on September 22nd, once standing above the price mark.
 
In the spot market, as SHFE copper prices felt weak to move higher, copper offers stabilized between premiums of positive RMB 200-300/mt in the morning business. However, since cargo-holders were eager to sell due to capital pressures before the month’s end and market worries over a continuous copper price rebound, spot copper premiums narrowed to between positive RMB 120-250/mt near the midday. Traded prices for standard-quality copper were between RMB 57,900-58,100/mt, and RMB 58,000-58,250/mt for high-quality copper. Downstream producers and speculators were wary of entering the market, keeping market activity quiet and copper supply ample again. In the afternoon session, as SHFE copper prices continued to move higher, spot copper premiums narrowed again, with hydro-copper already trading at discounts and standard-quality copper holding firm at premiums of positive RMB 0/mt. Overall spot copper offers were mainly quoted between premiums of positive RMB 0-150/mt in the afternoon session, and traded prices stood above RMB 58,000/mt, restricting market transactions. 

Aluminum:
 
The most active SHFE 1201 aluminum contract opened at RMB 16,400/mt on October 27th. After temporarily hitting RMB 16,520/mt the intraday high, the contract quickly slipped and finally closed at RMB 16,440/mt, up RMB 60/mt or 0.37% from the previous trading day. Positions of the contract increased 54 lots to 65,058 lots. Traded volumes during the day were only 30,000 lots. More investors turned to contracts for delivery in a longer time. SMM believes that the most active aluminum contract needs to gather more momentum if it wants to break through the RMB 16,500/mt mark.
 
Traded prices of spot aluminum in Shanghai were between RMB 16,450-16,500/mt on October 27th, with premiums of RMB 20-40/mt over the SHFE current-month aluminum price.
 
In the morning, the SHFE current-month aluminum price narrowly fluctuated above RMB 16,400/mt, but lacked momentum to climb. Downstream demand was weak due to order insufficiency. The bearish sentiment gained strength among goods holders, with quotations being lowered to attract buyers but only to meet little response. Market transactions remained limited.
 
In the afternoon, the SHFE current-month aluminum price continued to fluctuate within a narrow range. Goods holders’ worries towards stagnation in aluminum prices eased following a EU deal to solve the region’s debt crisis and Chinese government’s signals to provide fine macro economic regulations, with goods movement rarely seen. Only a small volume of spot aluminum was traded between RMB 16,450-16,470/mt. Most quotations were above the RMB 16,500/mt mark. Market transactions were limited.

Lead:

On Thursday, SHFE 1112 lead contract prices opened at RMB 15,080/mt, then dipped to as low as RMB 14,950/mt. Boosted by domestic stock market and strong buying interest, SHFE lead prices rebounded to RMB 15,000-15,100/mt, and finally closed at RMB 15,105/mt. Trading volumes decreased by 280 lots to 690 lots, and total positions increased by 14 lots to 1,992 lots.

In domestic spot market, well-known brands such as Chengyuan and Chihong Zn & Ge were quoted between RMB 15,150-15,170/mt in the morning session, with premiums of RMB 50/mt against SHFE 1112 lead contract prices. The brands Baiyin and Hanjiang were traded around RMB 15,100/mt. In the afternoon, SHFE lead prices fluctuated narrowly, with spot lead traded around RMB 15,150/mt. Smelters increased goods supply to generate cash near the end of the month, while downstream buying interest was low.

Zinc:

On Thursday, SHFE three-month zinc contract prices opened at RMB 15,020/mt, fluctuating around the moving average in the morning session. In the afternoon, SHFE three-month zinc contract prices generally moved between RMB 15,000-15,100/mt, and finally closed at RMB 15,145/mt, up RMB 175/mt, or up 1.17%, above the 20-day moving average. Trading volumes decreased by 170,000 lots to 417,834 lots, and total positions increased by 1,720 lots to 226,804 lots.
 
In domestic spot markets, #0 zinc was traded RMB 15,080-15,120/mt, with premiums of RMB 0-10/mt against SHFE 1201 zinc contract prices. #1 zinc was traded between RMB 15,050-15,100/mt. The market was cautious, and downstream buying interest was low, leaving transactions quiet.

Tin:

Shanghai spot tin prices were little changed on October 27th. Mainstream tin brands Yunxi, Yunheng and Yunxiang traded between RMB 181,000-183,000/mt. Small volumes of Nanshan branded tin was traded between RMB 180,000-181,000/mt. Fluctuation continued in LME tin prices despite progresses made on solving the European debt crisis. Downstream demand remained weak. Supply by smelters was limited due to high production cost.

Nickel:

LME nickel prices advanced to hit a high of USD 19,889/mt after opening at USD 19,275/mt during the Asian trading hours on Thursday. The Germany Parliament approved expansion plan of EFSF. In addition, newly released economic data from the US were better than market expectation. Furthermore, China might change its tightening policies. These postiv news continued to boost base metal price on Thursday. LME nickel inventories were 88,128 mt, up 540 mt from a day earlier.

In the Shanghai nickel spot market, spot prices slipped slightly on Thursday. Mainstream traded prices of nickel from Russia were between RMB 139,000-139,500/mt, and mainstream traded prices of nickel from Jinchuan Group were around RMB 141,000/mt. Although LME nickel prices advanced on Thursday, trading sentiment in spot market was lackluster. Transactions only slightly improved from a day earlier, but were still considered sluggish. Downstream consumers and traders both had low interest in purchasing goods. Although goods news came one after another recently, the unsolved European debt crisis made market players conduct transactions cautiously.