SMM Daily Review – 2011/12/8 Base Metals Market

SHANGHAI, Dec. 9 (SMM)--

Copper:
SHFE 1202 copper contract prices, the most active one, opened RMB 220/mt lower at RMB 57,830/mt Thursday, and narrowly fluctuated around this price mark during the whole trading day. SHFE three-month copper contract prices came under great pressure at the RMB 58,000/mt level at the high-end, and fell to RMB 57,580/mt at the low-end. Finally, SHFE 1202 copper contract prices closed at RMB 57,860/mt, down RMB 190/mt or 0.33%. Positions for SHFE 1202 copper contracts were down 9,282 lots, while trading volumes were up 25,399 lots. Short investors closed positions on a large scale at low price levels to avoid risks while awaiting the result of the EU summit, so SHFE copper prices still faced great resistance at the 5-day moving average. 

In the spot market, although SHFE copper prices moved lower after a low open, sufficient copper supply caused copper discounts to remain between discounts of negative RMB150-30/mt in the morning business. Traded prices for standard-quality copper were between RMB 57,950-58,050/mt, and RMB 58,000-58,100/mt for high-quality copper. Downstream producers continued to stand on the sidelines, so market transactions failed to improve. In the afternoon business, spot copper discounts were little changed from the morning business levels, although SHFE copper prices edged higher. Nevertheless, traded prices stood above the RMB 58,000/mt level in the afternoon session, but consumption remained weak.

Aluminum:    
The most active SHFE three-month aluminum contract gapped lower at RMB 16,115/mt and closed at RMB 16,160/mt on December 8th. The highest price was RMB 16,175/mt. Transactions were 8,568 lots. Positions decreased 1,338 lots to 68,150 lots. At present the contract has found strong support at the 20-day moving average. Investors are circumspect as China will release its macro economic data this Friday.

Traded volumes of spot aluminum were limited in both East China and South China, with Shanghai spot aluminum trading at premiums of RMB 20-50/mt over aluminum prices in South China. Traders in South China remained cautious, saying they would not consider pushing up aluminum prices in the short term and would lower their stock even at lower prices. The weak downstream demand has scraped traders' effort to push up aluminum prices, with worries spreading all over the market.

Lead:
On Thursday, SHFE lead prices opened slightly lower at RMB 15,715/mt and moved around the moving average. In the midday, prices rose dramatically with increasing domestic stocks, and retook earlier losses. In the afternoon, SHFE lead prices moved between RMB 15,700-15,750/mt and finally closed at RMB 15,730/mt, down RMB 65/mt. Trading volumes decreased by 134 lots to 362 lots, and positions decreased by 52 lots to 2,062 lots.

In domestic spot markets, supply available in domestic spot markets increased, and quotations for well-known brands including Nanfang, Chihong Zn & Ge, Yuguang, Huoju were between RMB 15,630-15,650/mt, with discounts against the most active SHFE lead contract prices of negative RMB 50/mt. Traded prices for other brands such as Hanjiang were RMB 15,550/mt, with goods quickly sold out. SHFE lead prices jumped in the midday, and wait-and-see sentiment dominated the spot market, with few quotations reported. Transactions were muted on the whole.

Zinc:
On Thursday, SHFE three-month zinc contract prices opened lower at RMB 15,730/mt, and fluctuated around RMB 15,700/mt in the morning session. In the afternoon, SHFE three-month zinc contract prices jumped to move around RMB 15,780/mt, touching as high as RMB 15,890/mt, and finally closed at RMB 15,775/mt, down RMB 40/mt. Trading volumes increased by 21,466 lots, to 180,000 lots, and total position decreased by 6,880 lots to 150,000 lots.

In domestic spot markets, #0 zinc prices were RMB 120-140/mt below SHFE three-month zinc contract prices, between RMB 15,550-15,600/mt. imported zinc prices were RMB 160/mt below SHFE three-month zinc contract prices around RMB 15,500/mt. Cargo holders were actively moving goods as pessimism prevailed in the market, while downstream buying interest was low due to cash problems and pessimism, leaving transactions quiet. SHFE zinc prices jumped above the moving average near the end of the morning session, moving around RMB 15,700/mt, and discounts of #0 zinc expanded to negative RMB 160/mt, with traded prices around RMB 15,600/mt. But downstream buyers seldom inquired, keeping transactions still muted.

Tin:
Shanghai spot tin prices showed stabilizing signs on December 8th despite of goods movements at lower prices by a few smelters. Kaiyuan branded tin traded between RMB 159,500-160,000/mt, Yunxiang and Nanshan branded tin traded between 160,000-161,000/mt while Yunxi and Yunheng branded tin traded between RMB 163,000-164,000/mt. Though the lower end of the price range continued to slip, the overall market had stabilized from previous days. Most smelters were unwilling to lower prices further, which helped spot tin prices stabilize. At present investors are focusing on the EU summit, hoping results of which will bring some support for the metal. The traded volume remained slightly low as the downstream demand stayed weak. A batch of Malaysian tin ingots will enter domestic tin markets this week and are quoted at RMB 158,000/mt.

Nickel:
LME nickel prices advanced slightly to USD 18,134/mt after opening at USD 18,100/mt during the Asian trading hours on Thursday. The European Central Bank would announce latest interest rate result at 20:45 December 8th (Beijing Time). Based on result of survey conducted by authoritative media on 70 analysts, 60% of them believed that the ECB would cut interest rate on December 8th. Once the ECB announced interest rate cut, LME base metal prices are expected to rally in the short term. However, the interest rate cut will weigh on market sentiment in the medium term, as the interest rate cut interpreted by investors as a response to sluggish economic condition. In this context, LME base metal prices will extent weak momentum for a certain period after interest rate cut. LME nickel inventories were 90,348 mt, down 162 mt from a day earlier.

In the Shanghai nickel spot market, traded prices of nickel from Jinchuan Group were in the RMB 129,700-130,000/mt range, and mainstream traded prices of nickel from Russia were in the RMB 128,500-128,800/mt range. Affected by Wednesday's LME nickel price decline, spot nickel prices slipped on Thursday, but transactions did not change much from a day earlier.