SMM Daily Review - 2011/12/14 Base Metal Market

SHANGHAI, Dec. 15 (SMM) –

Copper
As LME copper prices closed with losses overnight, SHFE 1202 copper contract prices, the most active one, opened RMB 400/mt lower at RMB 55,750/mt Wednesday. As LME copper prices tested support at USD 7,500/mt during the whole trading day, and since Chinese stock markets remained weak and closed down, SHFE three-month copper contract prices fell to fluctuate around the daily moving average after meeting resistance at RMB 56,000/mt, with an intraday low at RMB 55,450/mt. Finally, the most actively-traded copper contract prices closed at RMB 55,710/mt, down RMB 440/mt or 0.78%. Positions for SHFE 1202 copper contracts were down 4,018 lots, and trading volumes were down 11,722 lots, while positions for SHFE 1203 copper contracts were up 12,318 lots, highlighting the continuous shift of the most actively-traded copper contracts. Short investors had more advantages against long investors, and SHFE copper prices already moved away from all moving averages. In this context, SHFE copper prices were expected to fall to between RMB 54,500-55,500/mt registered in the middle of November.

In the spot market, although SHFE copper prices extended losses, growing bearish sentiment propelled cargo-holders to move goods aggressively, which caused copper discounts to expand to between negative RMB 250-150/mt near the midday. Traded prices for standard-quality copper were between RMB 56,150-56,250/mt in the morning business, and RMB 56,200-56,350/mt for high-quality copper. Cargo-holders of domestic copper were forced to move goods as well, but market supply was still dominated by imported copper, with discounts continuing to expand. Only some speculators made appropriate purchases, and overall market transactions were very limited in the morning session. In the afternoon business, SHFE current-month copper contract prices edged higher, and spot copper discounts continued to increase, up to between negative RMB 350-150/mt, while traded prices declined to between RMB 56,100-56,350/mt. Owing to increasing bearish sentiment, market transactions remained very limited with both downstream producers and speculators having no interest in purchases in the afternoon session.   

Aluminum
The most active SHFE four-month aluminum contract gapped lower again on December 14th at RMB 15,880/mt and closed RMB 150/mt or 0.94% lower at RMB 15,835/mt.The lowest price was hit at RMB 15,825/mt as more shorts entered the market amid continued losses in the Shanghai Composite Index. Positions of the contract increased 3,544 lots to 68,686 lots. SMM expects the contract to test support at RMB 15,800/mt in the near term given mounting capital pressure at year's end, possible power cuts in winter due to supply shortage and staying weak demand.

Traded prices of spot aluminum in Shanghai were between RMB 16,030-16,060/mt on Tuesday, with premiums of RMB 0-20/mt over the SHFE current-month aluminum price. In the morning, SHFE aluminum prices kept falling, with the SHFE current-month aluminum price dropping to near RMB 16,000/mt. With only 2 days before the delivery date, cargo holders were much interested in selling goods with premiums over the SHFE current-month aluminum price. However, downstream consumption was sluggish due to capital pressure and scarce orders, thereby dragging aluminum prices down. Deals were rarely made with a remarkable contrast between sellers and buyers. In the afternoon, the SHFE current-month aluminum price shed more losses. The spot market was quite quiet though, with sparse deals done near RMB 16,000/mt. Spot may see further losses today, however, according to most market players.

Lead
On Wednesday, SHFE lead prices opened lower at RMB 15,490/mt with pressure at the 20-day moving average, and then moved between RMB 15,340-15,370/mt. In the afternoon, SHFE lead prices maintained downward trend and dipped to RMB 15,255/mt at the tail of trading due to the drop in both Chinese stocks and LME lead prices, but gained support at the 60-day moving average, with prices finally closing at RMB 15,320/mt, down RMB 200/mt, or 1.3%. Trading volumes increased by 444 lots to 688 lots, and positions decreased by 306 lots to 1,536 lots.

In domestic spot markets, quotations for domestic well-known brands such as Nanfang, Chihong Zn & Ge were between RMB 15,380-15,400/mt, down RMB 100/mt from the previous trading day, with premiums against the most active SHFE lead contract prices of RMB 30/mt. Other brands such as Hexing were quoted at RMB 15,350-15,360/mt. Downstream buyers were actively buying goods due to lower prices, and some traders were also willing to purchase for stock, but smelters were not selling goods in large amounts. Transactions improved on the whole.
 
Zinc
On Wednesday, SHFE three-month zinc contract prices opened lower, dragged down by LME zinc prices overnight, and generally moved between RMB 15,100-15,200/mt around the moving average during the day. At the end of trading, SHFE three-month zinc contract prices fell to close at RMB 14,980/mt, down RMB 405/mt, or 2.63%. Trading volumes increased by 80,000 lots to 195,216 lots, and total position increased by 10,216 lots, to 152,550 lots.

In domestic spot markets, #0 zinc was traded between RMB 15,050-15,080/mt, with discounts of negative RMB 80-90/mt against SHFE 1202 zinc contract prices. Quotations for imported zinc were still low, with discounts between negative RMB 140-150/mt against SHFE 1202 zinc contract prices, with traded prices as low as RMB 15,000-15,040/mt. #1 zinc was traded between RMB 15,000-15,050/mt, with prices for imported #0 zinc even lower. Downstream buyers preferred to buy imported zinc, but were still pessimistic, leaving transactions quiet.

Tin
Spot tin prices did not see much change on December 14th in Shanghai. Only small volumes of Yunxiang branded tin traded at the lower range between RMB 158,500-158,800/mt. Mainstream traded prices of Yunxi, Yunxiang and Yunheng branded tin were between RMB 159,500-163,000/mt and the traded volume was slightly limited. Jiangxi tin brands, whose quotations were generally lower, were hardly seen this week, thereby leading to reduced lower-priced supply. Some smelters said they will hold goods at least until the Spring Festival holiday passes. At the moment LME tin is moving blind, causing a stronger wait-and-see sentiment in the market. Therefore, Shanghai spot tin prices may be able to consolidate at current levels in the near term.

Nickel
LME nickel prices opened at USD 18,390/mt and closed at USD 18,225/mt on Tuesday, down USD 75/mt from a day earlier, with the highest price at USD 18,511/mt and the lowest price at USD 18,092/mt. On Wednesday, the US Federal Reserve kept benchmark interest rate unchanged between 0-0.25%, and announced to maintain the low interest rate till the middle of 2013. The US dollar index soared to break through 80, weighing down metal prices. Technically, most metals prices fluctuated slightly. LME nickel prices will find some support at the USD 18,000/mt in the short term, but will likely fall below this level. In addition, gold prices were close to USD 1,600/oz, and if gold prices stop falling on Wednesday, they will help support other metals prices. SMM predicts LME nickel prices will fluctuate slightly, with prices expected to close with small declines. LME nickel inventories were 89,820 mt, down 150 mt.  

In the Shanghai nickel spot market, Mainstream traded prices of nickel from Jinchuan Group were in the RMB 129,500-129,800/mt range recently, and mainstream traded prices of nickel from Russia were in the RMB 127,500-128,000/mt range. Domestic nickel prices continued to fall negatively affected by slipping LME nickel prices. Market buying interest was low before LME nickel prices stabilized, and downstream enterprises stayed out of the market, keeping overall trading activity sluggish.