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SMM Daily Review – 2011/11/22 Base Metals Market
Nov 23,2011 09:35CST
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As LME copper prices continued to slump overnight, SHFE 1202 copper contract prices, the most active one, opened down by 430/mt at RMB 54,610/mt on Tuesday.

SHANGHAI, Nov. 23 (SMM)--

As LME copper prices continued to slump overnight, SHFE 1202 copper contract prices, the most active one, opened down by 430/mt at RMB 54,610/mt on Tuesday. After the opening, SHFE three-month copper contract prices got support after temporarily falling to RMB 54,360/mt, and gradually rallied from the daily moving average as LME copper prices rebounded to USD 7,400/mt. However, since Chinese stock markets closed 1% down in the session and long investors cut some position holdings at high price levels, SHFE three-month copper contract prices lost momentum after climbing to RMB 55,000/mt, with a daily high at RMB 55,240/mt and mainly fluctuating around RMB 55,000/mt in the afternoon business. Finally, SHFE 1202 copper contract prices closed at RMB 54,980/mt, down RMB 60/mt or 0.11%. Positions for SHFE 1202 copper contracts were slightly up by 832 lots, and trading volumes were up 124,000 lots. Short investors still had advantages against long investors, becoming potential pressures to copper prices over the near term. Increasing uncertainties on the market propelled short-term speculators to conduct intraday operation. SHFE copper prices showed more resilience. 

In the spot market, as SHFE current-month copper contract prices held firm, copper premiums remained at high levels, initially reporting between positive RMB 600-750/mt in the morning business. However, as SHFE copper prices moved higher after a low open and since consumption failed to improve, spot copper premiums began to slide, falling to positive RMB 500-650/mt near the midday. As the SHFE/LME copper price ratio rose above 7.40, supply of imported copper increased. Cargo-holders of imported copper had no intention of holding prices, but chose to cut premiums to generate cash. However, cargo-holders of domestic high-quality copper insisted on high copper premiums and were still unwilling to move goods, which further expanded the price gap between low-quality and high-quality copper. Increases in copper supply added difficulties to market transactions. In the afternoon session, SHFE copper prices fluctuated, and spot copper premiums declined slightly to between positive RMB 400-600/mt. Traded prices were between RMB 56,300-56,600/mt in the afternoon business, and imported copper still increased. 

The most active SHFE aluminum contract 1202 gapped lower at RMB 15,900/mt and closed at RMB 15,955/mt, down RMB 85/mt or 0.53% from the previous trading day. Positions of the contract increased 7,190 lots to 76,264 lots. Due to a slightly bearish market sentiment and low traded volumes, the most active SHFE aluminum contract had dipped below RMB 16,000/mt once. It rebounded above the mark later, but only to drop below the mark for a second time and seemingly has stepped on the downward track. SMM expects the most active SHFE aluminum contract to test support at RMB 15,900/mt in the short term.

Traded prices of spot aluminum in Shanghai were between RMB 15,880-15,910/mt on Tuesday, with premiums between negative and positive RMB 10/mt over the SHFE current-month aluminum price. In the morning, SHFE aluminum prices kept falling and the SHFE current-month aluminum price was under pressure at RMB 15,900/mt. Spot price fell below RMB 15,900/mt and hit a new yearly low for two consecutive days as a result. Goods holders were unwilling to move goods, leading to limited supply in the market. Though downstream buyers still purchased on an as-needed basis, transactions turned relatively active at lower prices due to reduced supply. In the afternoon, the SHFE current-month aluminum price narrowly fluctuated above the intraday moving average and consolidated at RMB 15,900/mt. The wait-and-see sentiment prevailed among both sellers and buyers, with sparse quotations at RMB 15,900-15,910/mt being reported. Transactions were quite limited.

SHFE lead prices opened slightly lower at RMB 15,205/mt and edged up to RMB 15,350/mt on Tuesday. Prices moved between RMB 15,300-15,350/mt through the day and closed at the intraday high of RMB 15,350/mt. Trading volumes increased by 66 lots to 512 lots, and positions increased by 140 lots to 2,104 lots.

In domestic spot markets, traded prices of well-known domestic brands such as Nanfang and Chinhong Zn & Ge were between RMB 15,370-15,400/mt, with premiums against SHFE 1201 lead contract prices maintaining between RMB 40-50/mt. Traded prices for other brands such as Baiyin were between RMB 15,300-15,320/mt. Smelters were still unwilling to sell goods, while traders showed no intention to stock goods in large amount and purchases were limited among downstream buyers, leaving transactions rather modest.

On Tuesday, SHFE zinc prices opened lower at RMB 15,000/mt, dragged down by LME zinc prices overnight, finding support at RMB 15,000/mt, and generally fluctuated around the moving average. SHFE zinc prices touched an intraday high RMB 15,235/mt at noon, and fluctuated between RMB 15,100-15,200/mt, with prices finally closing at RMB 15,170/mt, up RMB 55/mt. Trading volumes increased by 20,000 lots to 269,248 lots, and total position increased by 2,260 lots to 178,318 lots. SHFE zinc prices were not as bullish as LME zinc prices, but strongly resisted declines.

In domestic spot markets, SHFE three-month zinc contract prices fluctuated around RMB 15,000/mt, and #0 zinc was traded between RMB 15,100-15,150/mt. Spot prices rose to RMB 15,180/mt at noon, with discounts of negative RMB 10-20/mt against SHFE zinc prices. #1 zinc was traded between RMB 15,050-15,100/mt, with transactions quiet due to low goods supply. Traders were actively moving goods, while downstream buyers were cautious due to pessimism, leaving transactions muted. Some investors were selling cautiously due to the lack of arbitrage opportunity, while smelters were also holding goods, keeping spot prices firm.

Following heavy losses in LME tin overnight, traded prices of mainstream Yunheng, Jinhai, Nanshan branded tin dropped to RMB 173,000-174,000/mt in Shanghai on November 22nd, with small volumes of Yunxi branded tin being traded between RMB 175,500-176,000/mt. The traded volume remained limited due to low buying interest.

China spot tin prices continued to plunge this week, with the SMM average tin price dropping RMB 2,650/mt from the same period last week. This was due to active selling at lower prices amid continuous weakness in LME tin, a dim market outlook and weak demand. Increased supply at lower prices also led to few deals at high prices, thereby dragging down mainstream traded prices. According to the present situation, spot tin prices still have downward space and lack the momentum to rebound.

LME nickel prices fluctuated narrowly after opening at USD 17,766/mt during the Asian trading hours on Tuesday, and slightly advanced during the early European trading hours. The US and European debt crisis continued to weigh on market sentiment. Close attention should be paid to China's initial PMI scheduled to be announced on Wednesday. LME nickel inventories were 85,998 mt, up 2,058 mt from a day earlier. LME nickel inventories have declined sharply by 8.5% in recent month, which sent premiums of LME spot nickel to USD 35/mt and supported LME nickel prices to remain resilient.

In the Shanghai nickel spot market, trading sentiment was still quiet. Mainstream traded prices of nickel from Russia were in the RMB 127,800-128,000/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 129,800-130,000/mt range. Spot nickel prices moved relatively stable on Tuesday, and deals were still largely done among traders. 

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