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SMM Daily Review - 2011/11/25 Base Metals Market
Nov 28,2011 10:22CST
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Daily traded prices for standard-quality copper were between RMB 55,400-55,600/mt, and RMB 55,500-55,750/mt for high-quality copper.

SHANGHAI, Nov. 28 (SMM) --


SHFE 1202 copper contract prices, the most active one, opened slightly up by 350/mt at RMB 54,200/mt on Friday. After the opening, SHFE three-month copper contract prices followed LME copper prices to narrow the fluctuating band, and fluctuated around RMB 54,000/mt before the midday with the gap between the highest and lowest price not exceeding RMB 1,000/mt. In the afternoon business, as LME copper prices lowered to test USD 7,200/mt, and since Chinese stock markets fell below 2,400 points, SHFE three-month copper contract prices drifted lower and touched a low at RMB 53,530/mt. Finally, SHFE 1202 copper contract prices closed at RMB 54,590/mt, down RMB 260/mt or 0.48%. Positions for SHFE 1202 copper contracts were up 2,968 lots, while trading volumes were down 506,000 lots. Both long and short investors opted to cut position holdings due to weakening trading interest, and SHFE copper prices failed to break resistance at the 5-day moving average, with downside price pointing to RMB 53,000/mt.
In the spot market, as SHFE copper prices fluctuated around RMB 55,000/mt and supply of imported copper increased due to slight profits, premiums for high-quality copper fell to between positive RMB 500-650/mt in the morning business. Daily traded prices for standard-quality copper were between RMB 55,400-55,600/mt, and RMB 55,500-55,750/mt for high-quality copper. Premiums for domestic standard-quality copper remained firm due to a drop in supply, while cargo-holders of hydro-copper were still seen to move goods for cash generation, resulting in modest market transactions. In the afternoon session, as SHFE copper prices slid rapidly, mainstream copper premiums expanded to between positive RMB 500-800/mt and traded prices stayed flat with the morning business levels, but transaction volumes remained low. SHFE copper inventories were down by 8,994 mt to 65,205 mt in the week ending November 25th. Downstream producers made more purchases than the prior week, and low copper inventories would support the low-end SHFE copper prices. 

The most active SHFE aluminum contract 1202 opened at RMB 15,815/mt and closed at RMB 15810/mt, up RMB 5/mt or 0.03% from the previous trading day. After temporarily slipping below RMB 15,800/mt, the contract rebounded to an intraday day high of RMB 15,860/mt supported by bargain hunting, but erased almost all gains later due to profit-taking. Positions of the contract increased 1,792 lots to 87,186 lots. The most active SHFE aluminum contract lacked enough rebound momentum and also has limited downward space. Low trading volumes with short-swing trading dominating the market led to a stagnation at RMB 15,800/mt. SMM expects the contract to continuously struggle at the mark in the short term. The latest SHFE aluminum stock increased 131 mt to 179,574 mt.
Traded prices of spot aluminum in Shanghai were between RMB 15,850-15,880/mt on Thursday, with premiums of RMB 30-50/mt over the SHFE current-month aluminum price. In the morning, SHFE aluminum prices stopped falling at RMB 15,800/mt. Coupled with blocked railway transportation in Qinghai Province, deliveries of spot goods were delayed, limiting spot aluminum supply in the market. The rebound momentum for spot aluminum prices strengthened as a result, with spot premiums over the SHFE current-month aluminum price expanding to RMB 50/mt. Some downstream buyers and middlemen actively purchased at lower prices, leading to relatively active markets. In the afternoon, the SHFE current-month aluminum price fluctuated downward to the RMB 15,800/mt mark. The approaching weekend and limited stock led to quiet markets with only sparse quotations between RMB 15,860-15,870/mt being reported. Deals were quite rare.


SHFE lead prices opened at RMB 15,180/mt last Friday and soon fell to RMB 15,000/mt, but rebounded and gained back previous losses. Prices then moved between RMB 15,100-15,170/mt and finally closed at RMB 15,150/mt, down RMB 40/mt. Trading volumes increased slightly by 54 lots to 678 lots, and positions increased by 180 lots to 2,434 lots.

In domestic market, traded prices for domestic well-known brands such as Nanfang and Chinhong Zn & Ge remained stable compared to the previous trading day around RMB 15,250/mt, with premiums against the most active SHFE lead contract prices expanding to RMB 50-80/mt. Other lead brands were traded at RMB 15,150/mt. With the expansion of premiums, arbitrage trading increased and purchases among downstream buyers remained active. Transactions improved remarkably.


Last Friday, SHFE three-month zinc contract prices opened lower at RMB 14,870/mt and dipped to RMB 14,770/mt, rallying to the moving average as a large number of investors entered the market. Boosted by the Shanghai Composite Index, SHFE three-month zinc contract prices gained back previous losses and rallied to RMB 15,000/mt level. In the afternoon, as the Shanghai Composite Index fell slightly, SHFE three-month zinc contract price fell below the moving average to close at RMB 14,835/mt, down RMB 65/mt. Trading volumes decreased by 240,000 lots to 247,562 lots, and total position decreased by 10,256 lots to 203,540 lots.
In domestic spot markets, #0 zinc was traded between RMB 14,900-14,950/mt, with premiums of RMB 40-50/mt against SHFE 1202 zinc contract prices. #1 zinc was traded between RMB 14,850-14,900/mt. Zinc prices were firm despite negative economic news, but downstream buying interest was low due to pessimism.


Shanghai spot tin prices continued to slip on November 25th. Mainstream Yunxi, Tianxi, Nanshan and Jinlong branded tin was traded between RMB 172,000-174,000/mt. Though most smelters were unwilling to move goods and kept quotations firm, lower-priced supply was not affected and most deals were concluded at lower prices. Due to the weak demand, inquiries were not seen for branded tin quoted at RMB 176,000/mt. Continuously dropping LME tin prices also damped the market confidence with more selling-off being seen. It seems that smelters failed to get what they want by holding goods. Domestic tin prices therefore still face downside risks.


LME nickel prices initially advanced but later fell back after opening at USD 17,075/mt during the Asian trading hours last Friday. During the European trading hours, LME nickel prices were weighed to hit a low of USD 16,825/mt due to stronger US dollar index. LME nickel inventories were 88,668 mt, up 192 mt from a day earlier.
In the Shanghai nickel spot market, mainstream traded prices of nickel from Russia were in the RMB 125,500-125,800/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 127,500-128,000/mt range. Since LME nickel prices were sluggish on Friday, inquires were limited and transactions were quiet from a day earlier in spot nickel market. In addition, soft demand of refined nickel from downstream steel mills and electroplate factories also contributed to muted transactions in spot nickel market. 


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