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SMM Daily Review - 2011/11/8 Base Metal Market
Nov 9,2011 10:12CST
price review forecast
SHFE 1201 copper contract prices opened RMB 280/mt higher at RMB 58,420/mt on Tuesday, and the most active SHFE aluminum contract 1201 opened slightly lower at RMB 16,250/mt.

SHANGHAI, Nov. 9 (SMM) –

SHFE 1201 copper contract prices, the most active one, opened slightly higher RMB 280/mt at RMB 58,420/mt on Tuesday. After the opening, due to resistance, SHFE three-month copper contract prices fell by more than RMB 1,000/mt after briefly climbing to a high of RMB 58,650/mt. However, SHFE three-month copper contract prices gained support from long investors after falling down to RMB 57,240/mt, rapidly rising above the daily moving average. In the afternoon session, as the Shanghai Composite Index lowered to test 2,500 points, SHFE three-month copper contract prices were weighed down and widely fluctuated around RMB 58,000/mt. Finally, SHFE 1201 copper contract prices closed at RMB 57,840/mt, down RMB 300/mt or 0.52%. Positions for SHFE 1201 copper contracts were down 6,812 lots, while trading volumes were up 133,000 lots. Without clear directions, long and short investors will await China's October CPI data and other important economic reports to be announced tomorrow.    

In the spot market, although SHFE copper prices fluctuated widely, spot copper offers held firm in the morning business, reporting between discounts of negative RMB 50/mt and premiums of positive RMB 50/mt. Traded prices for standard-quality copper were between RMB 58,000-58,400/mt, and RMB 58,100-58,650/mt for high-quality copper. Cargo-holders of hedged copper continued to actively move goods, while cargo-holders of domestic standard-quality copper were a little hesitant in sales because of copper discounts, leaving market transactions unimproved in the morning session. In the afternoon session, as SHFE current-month copper contract prices fluctuated around RMB 58,500/mt, hedged copper offers stayed flat with the morning business. Cargo-holders believing copper prices to fluctuate at current levels quoted spot copper premium for high-standard quality copper as high as between positive RMB 80-100/mt in the afternoon business, while overall quotations on the market were mixed, with the price differential reaching RMB 30-40/mt for the same band. Traded prices in the afternoon business were little changed from the morning session, with moderate trading sentiment. 

The most active SHFE aluminum contract 1201 opened slightly lower at RMB 16,250/mt on November 8th. Transactions only hit 150,000 lots during the day. The contract attempted for several times to break through the RMB 16,300/mt mark but ended in failure. Final price of the contract was RMB 16,235/mt, down RMB 75/mt or 0.46% from the previous trading day. Positions of the contract decreased 1,570 lots to 73,384 lots. Contracts with longer delivery terms were still stronger. The fluctuation range narrowed as a result of limited transactions. SMM expects the most active SHFE aluminum contract to continue test of the RMB 16,200/mt mark.

Traded prices of spot aluminum in Shanghai were between RMB 16,200-16,240/mt on November 8th, with discounts of RMB 30/mt to premiums of RMB 10/mt over the SHFE current-month aluminum price. In the morning, with stagnating SHFE aluminum prices, spot discounts over the SHFE current-month aluminum price widened as a result of weak demand and bearish market sentiment. Transactions were sparse. In the afternoon, with little change in the SHFE current-month aluminum price, the wait-and-see sentiment gained strength among goods holders. Sparse quotations in the afternoon did not change much from morning quotations. The buying interest among downstream buyers and middlemen was quote low. Transactions were hardly reached.

On Tuesday, SHFE lead prices opened at RMB 15,415/mt and then fell to RMB 15,300/mt, finding support at the 5-day moving average. Boosted by LME lead prices overnight, SHFE lead prices rallied to move between RMB 15,330-15,380/mt, with prices closing at RMB 15,335/mt, down RMB 70/mt. Trading volumes decreased by 32 lots to 334 lots, and total positions decreased by 62 lots to 1,906 lots.

In domestic spot markets, well-known brands prevailed in the market, with prices moving below RMB 15,400/mt. The brands Nanfang and Chihong Zn & Ge were traded between RMB 15,350-15,400/mt, and with transactions of other brands rarely reported. Downstream buyers increased purchases as lead prices stabilized. But transactions became muted in the afternoon.


On Tuesday, SHFE three-month zinc contract prices opened at RMB 15,420/mt, and dipped to RMB 15,250/mt. As the Shanghai Composite Index edged up, SHFE three-month zinc contract prices gained back previous losses to close at RMB 15,325/mt, down RMB 35/mt. Trading volumes increased by nearly 10,000 lots to 243,090 lots, and total position decreased by 3,690 lots to 196,200 lots.

In domestic spot markets, #0 zinc was traded between RMB 15,350-15,400/mt, close to SHFE 1201 zinc contract prices. #0 zinc was RMB 10-30/mt higher than SHFE zinc prices at noon, traded as low as RMB 15,300/mt. As SHFE zinc prices rose, traded prices of #0 zinc rallied to RMB 15,350/mt, while #1 zinc was mainly traded between RMB 15,250-15,300/mt. Transactions were quiet due to falling zinc prices.
LME nickel prices fluctuated narrowly around 5-day moving average after opening at USD 18,700/mt during the Asian trading hours on Tuesday, but advanced to hit a high of USD 18,775/mt on weaker US dollar during the early European trading hours. Market focus is shifting to the increasing budget deficit in Italy. LME nickel inventories were 83,640 mt, down 1,416 mt from a day earlier.

In the Shanghai nickel spot market, traded prices were relatively stable. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 138,000-138,500/mt range, and mainstream traded prices of nickel from Russia were in the RMB 135,000-135,500/mt range. Lacking guidance, LME nickel prices still fluctuated at low level, weighing down on market sentiment. Traders made transactions cautiously, and deals were still largely done among traders. Downstream stainless steel mills frequently reported production cut, reducing demand for refined nickel. In this context, few downstream consumers entered market. 

Shanghai spot tin prices did not see a significant change on November 8th. Mainstream Yunxi, Yunheng, Yunxiang, Jinlong and Nancang branded tin was traded between RMB 179,000-181,500/mt. While downstream demand remained weak, a significant amount of imported tin can still be seen in the market, which further weakened demand for domestic tin. SMM expects spot tin to remain weak in the short term and may possibly slip slightly.



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