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SMM Daily Review - 2011/12/23 Base Metals Market
Dec 26,2011 09:41CST
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As LME copper prices closed with gains overnight, SHFE 1203 copper contract prices opened up by RMB 570/mt at RMB 55,150/mt Friday.

SHANGHAI, Dec. 26 (SMM) –


As LME copper prices closed with gains overnight, SHFE 1203 copper contract prices opened up by RMB 570/mt at RMB 55,150/mt Friday. SHFE three-month copper contract prices moved higher after the opening and broke out resistance at RMB 55,500/mt, while increasing Chinese stock markets also provided support. SHFE three-month copper contract prices climbed to a high of RMB 55,880/mt after LME copper prices moved higher to test USD 7,600/mt in the afternoon session. Finally, SHFE 1203 copper contract prices closed at RMB 55,850/mt, up RMB 1,270/mt or 2.33%. Positions for SHFE 1203 copper contracts were up 4,816 lots, while trading volumes were down 64,904 lots. More long investors entered the market after SHFE copper prices broke out resistance at the RMB 55,000/mt level, but support at moving averages would be tested for the foreseeable future. 

In the spot market, as SHFE copper prices continued to rebound, and as cargo-holders were eager to move goods due to cash flow problems at the year-end, copper discounts expanded significantly in the morning business, up to between negative RMB 450-300/mt near the midday. Traded prices for standard-quality copper were between RMB 55,450-55,550/mt, and RMB 55,550-55,700/mt for high-quality copper. However, downstream producers were unable to make purchases due to capital problems, and only some producers having capitals chose an opportunity to enter the market, leaving market transactions lackluster. In the afternoon session, since SHFE copper prices rose further, spot copper discounts increased to between negative RMB 500-350/mt, but market activity remained very light. Copper inventories monitored by the SHFE were up by 2,713 mt to 82,283 mt in the week ending December 23rd, which was negative to copper price trends over the short term. LME market would be closed for the Christmas holiday on December 26th and 27th, and position closings were likely to push up SHFE copper prices. However, increasing cash flow problems during the last trading week of the year would cause spot copper discounts to expand further.   


SHFE aluminum for three-month delivery opened slightly higher at RMB 15,835/mt and closed RMB 115/mt or 0.73% higher at RMB 15,910/mt last Friday, supported by short covering after the Shanghai Composite Index returned above the 2,200 mark. Transactions climbed but stayed below 20,000 lots during the trading day and are expected to slip this coming week. Support for the RMB 15,900/mt mark seems to be weak according to performance during the day. The latest SHFE aluminum stock increased 2,420 mt to 191,941 mt.

Traded prices of spot aluminum in Shanghai were between RMB 16,000-16,040/mt on Friday, with discounts of RMB 10-50/mt over the SHFE current-month aluminum price. In the morning, SHFE aluminum prices opened higher with the SHFE current-month aluminum price testing RMB 16,050/mt. Several large enterprises replenished stocks at around RMB 16,000/mt by year’s end. In domestic spot markets, traders with large inventories were actively moving goods, even with expanded spot discounts. The remaining middlemen and traders with lower inventories began financial settlements and stayed away from the market. Transactions improved slightly on the whole. Quotations were sparse and fell between RMB 16,020-16,050/mt in the afternoon as the spot market was also overwhelmed by the Christmas atmosphere. Deals were rarely concluded.


On Friday, SHFE 1202 lead contract prices opened RMB 120/mt higher at RMB 15,300/mt, but fell slightly and moved around RMB 15,250/mt in the morning session. In the afternoon, prices rose to opening price but met resistance at the 30-day moving average, and finally closed at RMB 15,340/mt, up RMB 160/mt, or 1%. Trading volumes increased by 350 lots to 460 lots, and positions decreased by 58 lots to 1,404 lots.

Domestic spot prices increased by RMB 50/mt with the rising SHFE lead prices. Quotations for well-known brands such as Nanfang, Chihong Zn & Ge were around RMB 15,300/mt, with premiums against SHFE 1202 lead contract prices of RMB 50/mt. Quotations of other brands such as Hanjiang were between RMB 15,200-15,240/mt. In the afternoon, SHFE lead prices rose again, with most branded lead quoted at RMB 15,350/mt, but limited transactions were done. Downstream buyers purchased on as-needed basis and transactions were quiet ahead of weekend.


Last Friday, SHFE three-month zinc contract prices opened above the 5-day moving average and moving around the moving average during the day, boosted by the Shanghai Composite Index. In the afternoon, prices rose further driven up by SHFE copper prices, and tried to touch RMB 15,000/mt level as a large number of longs entered the market. SHFE three-month zinc contract prices finally closed at RMB 15,000/mt, up RMB 175/mt, or 1.18%. Trading volumes increased by 10,000 lots to 220,724 lots, and total position increased by 4,824 lots to 201,872 lots.

In domestic spot markets, spot discounts against SHFE 1203 zinc contract prices expanded to negative RMB 150/mt, with traded prices between RMB 14,750-14,800/mt. Imported zinc prices were still RMB 200/mt below SHFE three-month zinc contract prices, around RMB 14,750/mt. #1 zinc was traded between RMB 14,700-14,750/mt. But spot zinc was still unpopular, with transactions quiet.


Mainstream Yunxi, Yunxiang and Kaiyuan branded tin was traded between RMB 158,500-160,000/mt in Shanghai on December 23rd in Shanghai. Lower-priced tin was hardly seen and imported Malaysian tin traded between RMB 156,500-157,000/mt. Except Kaiyuan, no other tin brands were seen from Jiangxi. Market supply turned even more limited as the selling interest was low among smelters while transactions volume stayed light with the weak downstream demand being hardly improved.


Trading volumes and positions both fell to great extent in LME nickel market due to growing risk aversion sentiment before Christmas holiday. LME nickel inventories also increased significantly. It is expected that LME nickel prices are expected to stabilize in the near term. LME nickel inventories were up by 474 mt to 90,042 mt last Friday.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were around RMB 130,500/mt, with few transactions made at RMB 130,000/mt, and mainstream traded prices of nickel from Russia were in the RMB 128,000-128,500/mt range. Although LME nickel prices fell to certain extent last Thursday, traded prices in spot market only slipped slightly due to support from Jinchuan Group’s ex-works nickel prices. Market remained cautious, with quiet trading sentiment reported.

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