SMM Daily Review - 2011/12/13 Base Metal Market

SHANGHAI, Dec. 14 (SMM) –

Copper
As LME copper prices extended losses overnight, SHFE 1202 copper contract prices, the most active one, opened RMB 710/mt lower at RMB 56,260/mt Tuesday. SHFE three-month copper contract prices posted weak performance and fluctuated around the daily moving average of RMB 56,100/mt during the whole trading day, as the Shanghai Composite Index continued to close down by nearly 2%, with an intraday high at only RMB 56,360/mt. Finally, SHFE 1202 copper contract prices closed at RMB 56,120/mt, down RMB 850/mt or a loss of 1.49%. Positions for SHFE 1202 copper contracts were down 11,518 lots, and trading volumes were down 95,916 lots, highlighting the shift of the most actively-traded copper contracts. As market activity was light, copper prices were facing growing risks to fall further after falling below all moving averages. 

In the spot market, although SHFE copper prices moved lower after a low open, sufficient supply still caused copper discounts to expand across the board, reporting between negative RMB 200-100/mt. Daily traded prices for standard-quality copper were between RMB 57,450-57,600/mt, and RMB 57,500-57,650/mt for high-quality copper. Cargo-holders of hedged copper were eager to move goods during the whole trading day, and market transactions for high-quality copper were slightly higher than those for standard-quality copper. However, downstream producers still had no intention of entering the market, leaving market surpluses unresolved.  

Aluminum
The most active SHFE four-month aluminum contract gapped lower at RMB 16,000/mt and closed RMB 120/mt or 0.75% lower at RMB 15,955/mt after shorts dominated the market following a plunge in the Shanghai Composite Index. Positions dropped 2,874 lots to 65,142 lots. The metal previously returned above RMB 16,000/mt supported by a power rate hike. Weak global economies, however, have posed stronger pressures for aluminum, which therefore is expected to test support at RMB 15,900/mt in the near term.

Traded prices of spot aluminum in Shanghai were between RMB 16,100-16,130/mt on Tuesday, with premiums of RMB 10-40/mt over the SHFE current-month aluminum price. In the morning, the SHFE current-month aluminum price opened lower and was pressured at the RMB 16,100 mark. In the spot market, goods holders were unwilling to move goods, resulting in spot premiums over the SHFE current-month aluminum price, which, however, narrowed later due to low downstream buying interest. Dropping aluminum prices caused strong bearish moods in the market, with limited transactions done. In the afternoon, the SHFE current-month aluminum price stagnated and goods holders' selling interest turned even lower. Only sparse quotations between RMB 16,060-16,070/mt were seen but purchases were almost extinct. Deals were hardly concluded as a result.

Lead
On Tuesday, SHFE lead prices opened RMB 150/mt lower at RMB 15,515/mt and moved around the daily moving average, with pressure at the 5 and 10-day moving averages, but found support at the 20-day moving average. Prices moved between RMB 15,520-15,560/mt and finally closed at RMB 15,520/mt, down RMB 140/mt. Trading volumes decreased by 28 lots to 224 lots, and positions decreased by 104 lots to 1,842 lots.

In domestic spot markets, quotations for domestic well-known brands such as Nanfang, Chihong Zn & Ge were firm at RMB 15,550/mt. Other brands such as Chengyuan were traded at RMB 15,510-15,530/mt. In the afternoon, SHFE lead prices remained stable, but quotations for branded lead in spot markets were once cut to RMB 15,500/mt. Goods from Gejiu such as Hexing were traded at RMB 15,470-15,480/mt. Smelters were more reluctant to move goods due to dropping lead prices. Downstream buyers stayed away from the market over bearish outlook. Deals were limited in the market.

Zinc
On Tuesday, SHFE three-month zinc contract prices lost support at the 5-day moving averages after a low open, plagued by the tumbling LME zinc market overnight, and looked for support at the 60-day moving averages. The most actively-traded zinc contract in the SHFE market opened low at RMB 15,370/mt on Tuesday, with prices fluctuating narrowly between RMB 15,350-15,400/mt. Finally, SHFE three-month zinc contract prices closed at USD 15,355/mt, down RMB 240/mt, or 1.54%. Trading activity was low for the whole day. Transactions fell by 40,000 lots to 119,228 lots, and positions were down by 2,306 lots to 142,334 lots. Markets were wary of trading before the Central Economic Work Conference in China.

In the spot market, discounts narrowed slightly as SHFE three-month zinc contract prices fell to the 60-day moving averages for support. Discounts of #0 domestic zinc were RMB 100-120/mt over SHFE 1202 zinc contract, with deals mainly around RMB 15,300/mt. Offers for imported goods were mixed, with discounts over SHFE 1202 zinc contract between RMB 180-220/mt, and even at RMB 270/mt for some brands. Traded prices for imported zinc were mainly between RMB 15,200-15,250/mt. Deals for #1 zinc were in the RMB 15,200-15,250/mt range. Buying interest was low before prices stabilized, resulting in quiet trading sentiment.

Tin
Shanghai spot tin prices were little changed on December 13th though the high end slipped a little bit. Mainstream Yunxi, Yunshan and Yunxiang branded tin was traded between RMB 159,000-159,300 and other tin brands were rarely seen. Even though tin prices have dropped to the RMB 160,000/mt mark, tin ore prices stayed firm, thereby causing losses at smelters. As such, some smelters were holding goods waiting for tin prices to find a direction. Meanwhile, as domestic tin prices narrow their gaps with imported tin prices, the downward space of domestic tin is limited. Market demand remained weak. Therefore, if supply rises, China tin prices may slip further.

Nickel
Rating agencies warned the lack of radial measures from the EU summit to solve the debt crisis. In addition, Shanghai Composite Index fell below 23000. In this context, market confidence was soured, and pessimistic sentiment prevailed in nickel market. Technically, LME nickel prices are expected to struggle between USD 18,000/mt and 60-day moving average. LME nickel inventories were down by 330 mt to 89,994 mt.

In the Shanghai nickel spot market. Traded prices of nickel from Jinchuan Group were in the RMB 129,500-130,000/mt range, down RMB 1,050/mt. Traded prices of nickel from Russia were in the RMB 127,700-128,000/mt, down RMB 1,050/mt from a day earlier. Hit by LME nickel price slump and Shanghai Composite Index's decline below 23000, spot nickel traders' attitudes were mixed. Some pessimistic traders moved goods at low prices, resulting in brisk transactions. However, some traders were reluctant to move goods and adopted a wait-and-see attitude. Generally speaking, transactions were still relatively quiet, and the low-priced goods were favored by buyers.