SMM Daily Review – 2011/11/2 Base Metals Market

SHANGHAI, Nov. 3 (SMM) --

Copper:
As LME copper prices continued to slump overnight, SHFE 1201 copper contract prices, the most active one, opened RMB 1,350/mt lower at RMB 56,950/mt on Wednesday. After the opening, SHFE three-month copper contract prices drifted higher as LME copper prices increased above USD 7,800/mt, and mainly fluctuated around RMB 57,500/mt in the morning business. In the afternoon session, since the Shanghai Composite Index stabilized at 2,500 points, SHFE three-month copper contract prices continued to move higher, and broke out the resistance of RMB 58,000/mt at the tail of trading after LME copper prices rose above USD 7,900/mt, with an intraday high at RMB 58,700/mt. Finally, SHFE 1201 copper contract prices closed at RMB 58,670/mt, up RMB 370/mt or 0.67%. Positions for SHFE 1201 copper contracts were up 14,218 lots, while trading volumes were down 57,740 lots. Most long and short investors made intraday operations while awaiting the US Federal Reserve (Fed) meeting in the evening.     

In the spot market, as SHFE copper prices remained weak after a low open, and since cargo-holders’ willingness in moving goods kept copper supply sufficient, copper premiums only rose slightly to between positive RMB 100-200/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,150-58,250/mt, and RMB 58,200-58,450/mt for high-quality copper. Downstream producers had little interest in purchasing, and market transactions were mainly made by traders, indicating wait-and-see sentiment in the market. In the afternoon session, as SHFE copper prices drifted higher, spot copper premiums fell to between positive RMB 0-160/mt. However, traded prices rose to between RMB 58,200-58,750/mt in the afternoon business, resulting in limited market transactions.  

Aluminum:    
The most active SHFE 1201 aluminum contract gapped 2.2% lower at RMB 16,000/mt on November 2nd following an over 5.5% plunge in LME aluminum prices. The contract gradually trimmed losses, however, supported by short covering and bargain-hunting, and finally closed at RMB 16,285/mt, down RMB 75/mt or 0.46%. Positions of the contract increased 5,202 lots to 74,640 lots. The contract was supported by production cost at the RMB 16,000/mt mark, but also met strong resistance at RMB 16,300/mt.

Traded prices of spot aluminum in Shanghai were between RMB 16,180-16,220/mt on November 2nd, with premiums of RMB 10-40/mt over the SHFE current-month aluminum price.

In the morning, SHFE aluminum prices gapped lower and fluctuated near RMB 16,100/mt. Though some goods holders were unwilling to move goods at lower prices, spot premiums over the SHFE current-month aluminum price failed to expand due to low downstream buying interest. Spot aluminum was traded at a new yearly low during the day. Only a few downstream buyers and middlemen replenished their stocks at lower prices and market transactions were quite limited.

In the afternoon, the SHFE current-month aluminum price broke through the RMB 16,200/mt mark with climbing Chinese stock prices. The selling interest turned quite low as most investors expect aluminum futures prices to rebound, and with stock replenishments at lower prices, spot aluminum prices climbed to RMB 16,200-16,250/mt as a result. Market transactions were quite limited though, due to tight supply.

Lead:
On Wednesday, SHFE lead prices opened RMB 300/mt lower at RMB 15,015/mt, and fluctuated around the moving average in the morning session. In the afternoon, SHFE lead prices touched RMB 15,340/mt tracking LME lead prices, but met resistance at the 5-day moving average, with prices finally closing at RMB 15,285/mt. Trading volumes increased by 56 lots to 676 lots, and total positions decreased by 38 lots to 1,988 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted around RMB 15,200/mt, well other brands such as Hanjiang were quoted around RMB 15,000/mt. The brand of Baiyin were quoted around RMB 14,900/mt. Spot lead prices rose by RMB 50/mt in the afternoon along with SHFE lead prices, to RMB 15,230-15,270/mt. Downstream buyers were cautious due to pessimism, leaving transactions quiet.

Zinc:
On Wednesday, SHFE three-month zinc contract prices opened lower at RMB 15,015/mt affected by LME zinc prices overnight, and fluctuated between RMB 15,050-15,100/mt in the morning session. Pushed up by the Shanghai Composite Index and LME zinc prices, SHFE three-month zinc contract prices edged up to close at RMB 15,325/mt, down RMB 70/mt. Trading volumes decreased by 86,586 lots to 413,060 lots, and total positions decreased by 6,922 lots to 221,008 lots.

In domestic spot markets, #0 zinc was traded between RMB 15,100-15,150/mt, with transactions limited at the high end, and with premiums between RMB 30-50/mt against SHFE 1201 zinc contract prices. #1 zinc was traded between RMB 15,050-15,100/mt. The overall transactions were muted. Spot prices were RMB 20-50/mt lower than SHFE zinc prices in the afternoon, but the market was cautious and transactions were quiet.

Tin:
Shanghai spot tin prices slipped a little bit on November 2nd following overnight losses of LME tin. Mainstream Yunheng and Yunxiang branded tin was traded between RMB 180,500-181,000/mt. Small volumes of Yunxi branded tin were traded between RMB 181,500-182,000/mt. Downstream demand remained weak. Market confidence was quite fragile as investors’ nerves were still stretched tight by the Greek as well as the Euro zone crises. LME tin therefore is expected to continue fluctuating in the short term, and possibly drop slightly. China spot tin prices are also expected to be on the downward track, but will find some support at RMB 180,000/mt.

Nickel:
On Wednesday, LME nickel prices recovered partial of the ground lost on Tuesday after opening at USD 18,700/mt during the Asian trading hours and hit a high of USD 19,080/m due to support from weaker US dollar. Investors still concerned over perspective of the European debt crisis, weighing down on market sentiment. It is expected that market sentiment will not improve to great extent in the short term. LME nickel inventories were 86,538 mt, down 138 mt. Jinchuan Group cut ex-works nickel prices by RMB 2,000/mt to RMB 138,000/mt on Wednesday.

In the Shanghai nickel spot market, affected by Tuesday’s LME nickel price slump, Jinchuan Group cut ex-works nickel prices on Wednesday. In response, spot nickel prices fell significantly. Traded prices of nickel from Russia were in the RMB 136,300-136,800/mt range, and traded prices of nickel from Jinchuan Group were in the RMB 138,500-139,000/mt. Traded prices were relatively lower in the morning trading hours, but rebounded in the afternoon trading hours along with LME nickel price increase. Overall trading sentiment was still sluggish in spot nickel market. Downstream demand was soft, and traders lacked interest in making transactions due to weak performance of LME nickel prices.