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SMM Daily Review - 2011/11/15 Base Metals Market
Nov 16,2011 09:50CST
smm insight
As LME copper prices pared gains overnight, SHFE 1201 copper contract prices opened 450/mt lower at RMB 57,520/mt on Tuesday.

SHANGHAI, Nov. 16 (SMM) --


As LME copper prices pared gains overnight, SHFE 1201 copper contract prices opened 450/mt lower at RMB 57,520/mt on Tuesday. After the opening, SHFE three-month copper contract prices gradually drifter lower and came under pressure at the daily moving average due to growing selling pressures, with a low touching RMB 57,120/mt in the afternoon session. However, due to support at RMB 57,000/mt and increasing establishment of new positions at this price mark, and since LME copper prices experienced a round of increases and the Shanghai Composite Index also reversed earlier declines, SHFE three-month copper contract prices returned to near the daily moving average of RMB 57,500/mt and fluctuated widely around this price mark. Finally, SHFE 1201 copper contract prices closed at RMB 57,490/mt, down RMB 480/mt or 0.83%. Positions for SHFE 1201 copper contracts were down 5,390 lots, and trading volumes were down 180,000 lots, while positions for SHFE 1202 copper contracts were up 12,618 lots, suggesting the shift of the most actively-traded copper contracts. SHFE copper prices still faced resistance at the 10-day moving average of RMB 57,500/mt.    

In the spot market, cargo-holders were eager to move goods to generate cash at the highs as SHFE copper prices moved lower after a low open, and since the price differential between SHFE 1111 and 1112 copper contracts was RMB 700/mt and the price gap between SHFE 1111 and 1201 copper contracts was RMB 1,000/mt. In this context, copper discounts were initially quoted between negative RMB 300-200/mt and expanded to between negative RMB 350-250/mt near the midday. Traded prices for standard-quality copper were between RMB 58,100-58,200/mt, and RMB 58,150-58,400/mt for high-quality copper. Downstream producers opted to stand on the sidelines during the whole trading day, while speculators chose some opportunities to conduct hedge trading. Market surpluses made spot copper premiums impossible. In the afternoon session, as SHFE current-month copper contract prices fell, the price differential with SHFE 1112 copper contract prices narrowed to RMB 200/mt, and spot copper discounts decreased to around negative RMB 100/mt and turned into negative RMB 0/mt at the tail of trading. Traded prices fluctuated around RMB 58,000/mt in the afternoon session, and fewer downstream producers made purchases, while speculators had no purchasing interest.


The most active SHFE aluminum contract 1201 opened lower at RMB 16,250/mt on November 15th. Due to lasting worries towards the European debt crisis, after temporarily hitting the intraday high of RMB 16,310/mt, the contract slipped and closed RMB 95/mt or 0.58% lower at RMB 16,205/mt. The transaction volume was less than 20,000 lots. Positions of the contract decreased 278 lots to 81,190 lots. The SHFE current-month aluminum contract, which is to be delivered today, recovered most losses supported by increased purchases. SMM expects the most active SHFE aluminum contract to struggle at RMB 16,200/mt as the European debt crisis continues to weigh on the global markets.

Traded prices of spot aluminum in Shanghai were between RMB 16,080-16,120/mt on Tuesday, with discounts of RMB 10-30/mt over the SHFE current-month aluminum price. Low-iron aluminum was traded between RMB 16,160-16,200/mt in Shanghai. Traded prices of spot aluminum in Wuxi were between RMB 16,060-16,100/mt. The SHFE 1111 current-month aluminum contract opened lower and slipped early on its last trading day to below RMB 16,100/mt. Goods holders were reluctant to move goods after the drop, with discounts over the SHFE current-month aluminum price narrowing slightly, which pushed some buyers to purchase at lower prices, though. Meanwhile, brands for delivery were rarely seen in spot market, boosting buying interest for SHFE current-month aluminum futures. This in turn helped the current-month aluminum contract rally. Spot aluminum prices also rose above RMB 16,100/mt supported by gains in aluminum futures prices. Transactions were moderate in the morning, however. Spot aluminum consolidated at RMB 16,100/mt in the afternoon as the SHFE current-month aluminum contract stayed above RMB 16,150/mt. Spot was quoted between 16,100-16,500/mt and traded between RMB 16,100-16,120/mt in the afternoon as only lower-priced goods were accepted. The wait-and-see sentiment was strong.


SHFE lead prices opened lower at RMB 15,455/mt and moved between RMB 15,350-15,400/mt on Tuesday. In the afternoon, prices moved lower to RMB 15,320-15,370/mt due to the further drop of LME lead prices, but gained support at 10-day moving average, finally closing at RMB 15,325/mt, down RMB 195/mt, or 1.26%. Trading volumes decreased slightly by 18 lots to 436 lots, and positions dropped by 156 lots to 1,692 lots, with the turnover rate of 5.96%. SHFE lead prices resisted declines.

SHFE lead prices opened lower and then moved around the moving average. In domestic spot markets, quotations for well-known lead brands such as Nanfang, Chihong Zn & Ge, and Hanjiang were between RMB 15,400-15,450/mt, with premiums against SHFE 1112 lead contract prices of RMB 30-50/mt. Traded prices of other brands such as Baiyin were around RMB 15,380/mt. In the afternoon, as lead futures prices fell further, traded prices of brands including Nanfang and Chihong Zn & Ge dropped to RMB 15,360-15,400/mt. Transactions were still quiet with wait-and-see sentiment.


On Tuesday, SHFE three-month zinc contract prices opened lower and then edged up along with LME zinc prices overnight, but met resistance at RMB 15,400/mt. Dragged down by LME zinc prices overnight, SHFE three-month zinc contract prices plunged to an intraday low RMB 15,200/mt after opening, and stopped falling between RMB 15,260-15,310/mt, with prices finally closing at RMB 15,305/mt, down RMB 20/mt. Trading volumes decreased by 170,880 lots to 173,730 lots, and total position decreased by 14,206 lots to 171,058 lots.

In domestic spot markets, #0 zinc was traded above RMB 15,300/mt despite SHFE three-month zinc contract prices opened lower, with premiums of RMB 10/mt against SHFE three-month zinc contract prices. As SHFE zinc prices edged up later the day, traders were cautious due to price volatility, with spot prices RMB 10/mt higher or RMB 10/mt lower. Mainstream traded prices of #0 zinc were around RMB 15,300/mt,while #1 zinc was traded between RMB 15,240-15,260/mt. Imported zinc was quoted RMB 40/mt lower than SHFE three-month zinc contract prices. In the afternoon, SHFE zinc prices further weakened, with premiums expanding to RMB 20/mt, and with mainstream traded prices of #0 zinc between RMB 15,270-15,280/mt. Smelters reduced goods supply as zinc prices fluctuated, with goods supply mainly available from traders. Downstream buyers purchased modestly, and the market was cautious due to prices volatility, keeping transactions muted.


Shanghai spot tin prices were little changed from the previous trading day on November 15th. Yunxi, Yunheng, Yunxiang and Kaiyuan etc tin brands mostly made deals between RMB 178,000-180,300/mt. Nanshan branded tin was quoted at RMB 178,300/mt. The traded volume slipped following an overnight plunge in LME tin prices. This, however, did not lead to an increase in lower-priced supply as smelters were holding goods. Imported tin appeared again in domestic market, for instance, Indonesian tin, which was quoted between RMB 177,000-177,500/mt.


After opening at USD 17,770/mt, LME nickel prices advanced to hit a high of USD 17,999/mt but later fluctuated lower on stronger US dollar during the Asian trading hours on Tuesday. Market concern over the European debt crisis continued to weigh on base metal prices. LME nickel inventories were 83,688 mt, down 204 mt from a day earlier.

In the Shanghai nickel spot market, Jinchuan Group cut ex-works nickel prices by RMB 3,000/mt to RMB 132,000/m, dragging down spot nickel prices. Mainstream traded prices of nickel from Russia were in the RMB 131,200-132,000/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 133,000-133,500/mt range. Downstream demand was soft, and traders made transactions cautiously. Overall trading sentiment remained quiet.


Shanghai base metals
European debt crisis

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