SMM Daily Review – 2011/11/3 Base Metals Market

SHANGHAI, Nov. 4 (SMM)--

Copper:
As LME copper prices closed higher overnight, SHFE 1201 copper contract prices, the most active one, opened RMB 490/mt up at RMB 58,210/mt on Thursday. After the opening, given resistance at the 5-day moving average, SHFE three-month copper contract prices only climbed to RMB 58,350/mt at the high-end and then fluctuated around RMB 57,500/mt. In the afternoon session, as LME copper prices slid to test USD 7,700/mt, SHFE three-month copper contract prices declined by more than RMB 1,000/mt, with the daily low-end at RMB 56,580/mt. Finally, the most actively-traded copper contract prices closed at RMB 56,800/mt, down RMB 920/mt or a loss of 1.59%. Positions for the most actively-traded copper contracts were down 9,610 lots, while trading volumes were down 136,000 lots. However, total trading volumes were still above 1 million lots, and the handover rate was more than 400%. Germany, France and other European countries announced on November 3rd Beijing time to suspend Greece’s bailout fund of EUR 8 billion which was previously scheduled to release this month, and would make the final decision after the Greece’s public vote. Meanwhile, the European leaders said the Greek vote would also decide whether or not Greece would remain in the Euro-zone area. As a result, the Euro was dampened again and long investors of LME copper closed positions rapidly. Sell-off pressures tended to be on the rise while investors were awaiting results of G20 Summit to be held in the evening, with panic and cautious sentiment dominating the market.  

In the spot market, despite a continuous drop in SHFE copper prices, copper premiums failed to increase further, reporting between positive RMB 0-120/mt in the morning business, since cargo-holders were active in moving goods for cash generation and copper supply, especially imported copper, was sufficient. Traded prices for standard-quality copper were between RMB 58,100-58,350/mt, and RMB 58,150-58,400/mt for high-quality copper. Traders kept cautious towards operation before the weekend, and downstream producers still made purchases on an as-needed basis, leading to sluggish market transactions. In the afternoon session, although SHFE copper prices slid by RMB 1,000/mt, spot copper premiums didn’t experience increases. Traded prices fell to between RMB 57,600-58,250/mt, experiencing huge fluctuations again, and only some downstream producers entered the market at the lows. 

Aluminum:    
The most active SHFE 1201 aluminum contract opened slightly higher at RMB 16,200/mt on November 3rd. Though the Shanghai Composite Index consolidated at the 2,500 points mark, the bearish sentiment still prevailed due to worries towards the Greek referendum. Both longs and shorts were cautious as the G20 Summit was being held, with transactions volumes falling to less than 25,000 lots. The contract erased gains of the day at the tail of trading due to concentrated short selling, and finally closed at RMB 16,140/mt, down RMB 40/mt or 0.25% from the previous trading day. Positions of the contract increased 1,940 lots to 76,580 lots. The most active aluminum contract is not likely to break through the RMB 16,200/mt mark without stimulus from positive news.

Traded prices of spot aluminum in Shanghai were between RMB 16,170-16,210/mt on November 3rd, with premiums of RMB 0-40/mt over the SHFE current-month aluminum price. In the morning, SHFE aluminum prices’ rebound failure built resistance for spot aluminum at RMB 16,200/mt. The buying interest was low during initial trading, but rose later. Market supply of branded aluminum for delivery was tight. Goods holders divided on quotations. Spot prices slipped earlier but rebounded later. The market sentiment was slightly active. In the afternoon, the bullish market sentiment quickly cooled after the SHFE current-month aluminum price slipped. Goods holders’ selling interest, however, also turned low. Quotations were spare but steady between RMB 16170-16190/mt. Transactions were quite limited.

Lead:
On Thursday, SHFE lead prices opened slightly lower at RMB 15,230/mt, and then fluctuated around the moving average. In the afternoon, SHFE lead prices fell by RMB 200/mt, to RMB 15,080/mt, dragged down by LME lead prices overnight, finding support at the 10-day moving average, and with prices finally closing at RMB 15,115/mt, down RMB 170/mt, or 1.1%. Trading volumes decreased by 330 lots to 346 lots, while total position increased by 12 lots to 2,000 lots.

In domestic spot markets, well-known brands such as Nanfang, Chihong Zn & Ge and Chengyuan were quoted between RMB 15,220-15,250/mt, while other brands such as Mengzi was quoted at RMB 15,200/mt. In the after noon, spot prices fell to RMB 15,150-15,200/mt along with SHFE lead prices. Both traders and downstream buyers were cautious due to uncertain price trends, and transactions did not improve.

Zinc:
On Thursday, SHFE three-month zinc contract prices opened at RMB 15,310/mt, fluctuating between RMB 15,250-15,300/mt in the morning session, and then fell below the moving average. Boosted by the Shanghai Composite Index, SHFE three-month zinc contract prices rallied to the moving average but inched down at noon, with prices dipping along with SHFE copper prices. Finally, SHFE three-month zinc contract prices closed at RMB 15,045/mt, down RMB 90/mt. Trading volumes decreased by 90,000 lots to 324,364 lots, and total position decreased by 4,640 lots to 216,368 lots.

In domestic spot markets, #0 zinc was traded between RMB 15,200-15,250/mt, and #1 zinc was traded between RMB 15,150-15,200/mt. Imported zinc were quoted RMB 50/mt lower than SHFE 1201 zinc contract prices. Indian zinc was popular in the market. The market increased purchases as zinc prices began to stabilize, with transactions improving from the previous day. But as SHFE zinc prices plunged in the afternoon, spot prices rose to RMB 15,100/mt, RMB 30-50/mt higher than SHFE 1201 zinc contract prices. But the market took a wait-and-see attitude due to pessimism.

Tin:
Shanghai spot tin prices slipped further to below RMB 180,000/mt on November 3rd. Mainstream tin brand during the day was Yunheng, which was quoted between RMB 179,500-180,000/mt. Domestic demand was little improved. As tin import continued, market demand for domestic tin turned even weaker. The Greek referendum came unexpectedly. Domestic tin prices may slip further due to fragile market confidence and tight credit supply.

Nickel:
On Wednesday, LME nickel prices opened at USD 18,700/mt and closed at USD 18,480/mt, down USD 120/mt from a day earlier, with the highest price at USD 19,080/mt and the lowest price at USD 18,350/mt. On Thursday, LME nickel prices fluctuated lower during Asian trading hours after opening at USD 18,600/mt, with prices dipping to a low of USD 18,322/mt. Markets eyed the G20 summit, and uncertainties over European debt crisis and higher possibility of Greek default weighed on market sentiment, with LME nickel prices slipping as a result. LME nickel inventories were 85,986 mt, down 552 mt.

In the Shanghai nickel spot market, traded prices fell slightly on Thursday, and mainstream traded prices for nickel from Russia were between RMB 136,000-136,500/mt, while mainstream traded prices for nickel from Jinchuan Group were between RMB 138,500-138,800/mt. Market transactions were sluggish, and only a small number of downstream enterprises made purchases, with traders showing little interest in transactions due to weak LME nickel prices. A lack of actual demand and possible further declines in LME nickel prices left spot market sentiment lackluster.