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SMM Daily Review - 2011/11/11 Base Metals Market
Nov 14,2011 09:33CST
smm insight
As LME copper prices narrowed Asian hour declines overnight, SHFE 1201 copper contract prices, the most active one, opened 30/mt up at RMB 55,100/mt on Friday.

SHANGHAI, Nov. 14 (SMM) --


As LME copper prices narrowed Asian hour declines overnight, SHFE 1201 copper contract prices, the most active one, opened 30/mt up at RMB 55,100/mt on Friday. After the opening, SHFE three-month copper contract prices temporarily tested the level near the lower trading limit on the previous day, but then returned and fluctuated around the daily moving average after gaining support at RMB 54,930/mt, and followed LME copper prices to push up before the afternoon session. In the afternoon session, as LME copper prices slid by nearly USD 50/mt after meeting resistance at the highs, and since the Shanghai Composite Index turned to fall after initially increasing, SHFE three-month copper contract prices met pressures at RMB 56,000/mt, with an intraday high at RMB 55,950/mt, and pared gains at the tail of trading, returning to the daily moving average of RMB 55,500/mt. Finally, SHFE 1201 copper contract prices closed at RMB 55,610/mt, up RMB 540/mt or 0.98%. Positions for SHFE 1201 copper contracts were slightly up 2,492 lots, and trading volumes were up 330,000 lots, with the daily handover rate reaching as high as near 400%. With the 30-day moving average gradually becoming the new resistance, SHFE copper price would fall further.      

In the spot market, as SHFE copper prices opened nearly flat, spot copper premiums sustained and were initially reported between positive RMB 50-150/mt in the morning session. However, as SHFE copper prices moved higher, spot copper premiums gradually narrowed to between positive RMB 0-150/mt. Traded prices for standard-quality copper were between RMB 56,300-56,500/mt in the morning business, and RMB 56,400-56,600/mt for high-quality copper. Spot copper supply was sufficient since the SHFE/LME copper price ratio increased slightly, with high-quality copper dominating the market. As SHFE copper prices climbed too quickly, spot copper premiums fell, restricting market transactions for standard-quality copper. Despite increases in market purchases, market supply still outstripped market demand. In the afternoon session, as SHFE copper prices edged up and since market transactions were still weak, standard-quality copper failed to maintain premiums of positive RMB 0/mt, and copper premiums for high-standard-quality copper also fell slightly, with mainstream price offers quoted between discounts of negative RMB 50/mt and premiums of positive RMB 50/mt. Traded prices in the afternoon business were nearly unchanged from the morning business, and some downstream producers entered the market to make purchases. SHFE copper inventories were slightly down 475 mt to 83,360 mt in the week ending November 11th. Overall, market surpluses extended for the week, and speculative activity was stable, while downstream producers slowed purchases.


The most active SHFE aluminum contract 1201 opened higher at RMB 16,110/mt on November 11, and closed RMB 145/mt or 0.91% higher at RMB 16,140/mt after hitting the intraday high of RMB 16,175/mt. Positions of the contract decreased 7,364 lots to 84,166 lots. The contract needs to gather more upward momentum before breaking through the RMB 16,200/mt mark. The LME aluminum stock increased 17,070 mt to 139,013 mt as some goods holders held back waiting for delivery so as to avoid losses in the spot aluminum market.

Mainstream traded prices of spot aluminum in Shanghai were between RMB 16,070-16,100/mt on November 11th, at discounts of RMB 20-40/mt over the SHFE current-month aluminum price. The market confidence for a rebound in spot aluminum prices was boosted by gains of SHFE aluminum prices during the day. Stock replenishments at lower prices gradually increased during the last trading day of the week, which in turn damped goods holders’ selling interest at wide discounts over the SHFE current-month aluminum price. Though supply remained excessive, the market sentiment improved. Transactions were sparse in the afternoon, with mainstream traded prices of RMB 16,080-16,090/mt.


SHFE 1112 lead contract prices fell after opening on Friday, then edged up to RMB 14,880/tm at the tail of morning session. In the afternoon, SHFE lead prices surged above the moving average and fluctuated between the 20-day and 30-day moving averages, with prices finally closing at RMB 14,910/mt, up RMB 115/mt. Trading volumes decreased by 112 lots to 1,982 lots, and positions dropped significantly by 846 lots to 474 lots, a signal of bearish attitude on market outlook. Most players chose to stay away from the market.

The most active SHFE lead contract fluctuated between RMB 14,800-14,850/mt after opening. In domestic spot markets, quotations were between RMB 14,850-14,900/mt, and moved up later to RMB 14,880-14,960/mt with SHFE lead prices, with prices as high as RMB 15,000/mt, and with premiums of RMB 0-30/mt against the most active SHFE lead contract prices. Well-known brands such as Chihong Zn & Ge, Nanfang, Chengyuan, Shuangyan and Hanjiang were mostly traded. But as downstream buyers were bearish on the market outlook, transactions were quieter than the previous trading day. In the afternoon, downstream buying interest improved due to rising SHFE lead prices, and traded prices rose to RMB 14,950-15,050/mt, with premiums of RMB 30/mt against SHFE 1201 lead contract prices.


Last Friday, SHFE three-month zinc contract prices opened at RMB 14,680/mt, and then fluctuated between RMB 14,705-14,735/mt. As a large number of shorts left the market with profit-taking, SHFE three-month zinc contract prices edged up to RMB 14,820/mt. But dragged down by the Shanghai Composite Index, SHFE three-month zinc contract prices inched down to close at RMB 14,760/mt, up RMB 95/mt. Trading volumes decreased by 275,228 lots to 273,660 lots, and total position decreased by 38,094 lots to 199,962 lots.

In domestic spot markets, #1 zinc was traded between RMB 14,800-14,850/mt in the morning session, with premiums of RMB 70-100/mt against SHFE 1201 zinc contract prices. #1 zinc was traded between RMB 14,750-14,800/mt. Market players were cautious as downstream buyers had replenished stocks the previous day, and since SHFE zinc prices were still volatile, keeping transactions quiet.


Shanghai spot tin prices slipped below RMB 180,000/mt on November 11th. Mainstream Yunxi, Yunheng and Tianti branded tin was traded between RMB 178,000-179,500/mt. Small volumes of Jinlong and Nancang branded tin were seen in the market with quotations holding firm at RMB 179,000/mt. No deal was reached for the two, however, as their qualities were inferior to Yunnan tin brands. Stock replenishments increased after tin prices dropped. The downstream demand nevertheless remained weak. Given the continuous weakness of LME tin and impact from imported tin, domestic tin prices are not likely to rebound in the near term.


LME nickel prices were weighed below 5-day moving average after opening at USD 18,250/mt during the Asian trading hours last Friday. The concern over the European debt crisis weighed on base metal prices. Although LME nickel prices pared certain losses, overall performance of LME nickel prices were still weak.

In the Shanghai nickel spot market, trading sentiment was still sluggish. Mainstream traded prices of nickel from Jinchuan Group were in the RMB 135,000-135,500/mt ragne, and mainstream traded prices of nickel from Russia were in the RMB 132,000-132,500/mt range. LME nickel prices extended weak momentum recently, and faced risks to slip further due to concern over debt crisis in Italy. Downstream demand was soft, due to tight liquidity and unit maintenance at stainless steel mills.


Shanghai base metals

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