SMM Daily Review - 2011/12/27 Base Metals Market

SHANGHAI, Dec. 28 (SMM) –

Copper

SHFE 1203 copper contract prices, the most active one, opened down by RMB 290/mt at RMB 55,100/mt Tuesday. After the opening, SHFE three-month copper contract prices were temporarily pushed up to a level below the 30-day moving average after some short investors reported profit-taking, but met resistance at a high of RMB 55,380/mt. As the Shanghai Composite Index came under pressure at 2,200 points, SHFE three-month copper contract prices posted weak performance and fluctuated around the daily moving average of RMB 55,150/mt during the whole trading day. Finally, SHFE 1203 copper contract prices closed at RMB 55,050/mt, down RMB 340/mt or 0.61%. Positions for SHFE 1203 copper contracts were down 456 lots, and trading volumes were down 83,252 lots. Owing to increasing pressures at the 5-day moving average of RMB 55,100/mt, copper became the only base metal that closed with losses on the SHFE market Tuesday. Intraday operations from long and short investors continued to fall, waiting for more guidance from LME copper prices after the LME market was open. 

In the spot market, although SHFE copper prices fluctuated after opening down, copper discounts expanded to between negative RMB 500-350/mt in the morning session, as spot copper supply remained sufficient now that cargo-holders of imported copper continued to aggressively move goods. Traded prices for standard-quality copper were between RMB 54,950-55,150/mt, and RMB 55,050-55,300/mt for high-quality copper. Cargo-holders of domestic copper were unwilling to sell given significant discounts, and smelters especially held quotations firm at RMB 55,000/mt. Speculators with capitals stood on the sidelines, waiting for opportunities of large discounts later this week, while downstream producers stayed out of the market, leading to very light market activity in the morning business. In the afternoon business, as SHFE copper prices kept fluctuating, spot copper discounts expanded further to between negative RMB 650-400/mt. Traded prices fell to between RMB 54,900 -55,150/mt in the afternoon session, but market transactions failed to improve.

Aluminum

SHFE aluminum for three-month delivery opened slightly lower at RMB 15,810/mt and dropped from the intraday high of RMB 15,890/mt during later trading to struggle near the intraday moving average. Lacking direction from the news side, both longs and shorts moved to the sidelines, with transactions for the three-month contract contracting 4,356 lots to 6,282 lots. Positions of the contract decreased 1,464 lots to 66,790 lots. SMM expects the contract to move within a narrow band before the New Year’s Day holiday as capital pressure and weak consumption damp market confidence. Support at RMB 15,800/mt below nevertheless still exist.

Traded prices of spot aluminum in Shanghai were between RMB 16,000-16,040/mt on Tuesday, with discounts of RMB 10-40/mt over the SHFE current-month aluminum price. In the morning, the SHFE current-month aluminum price stood steady above RMB 16,000/mt. While spot aluminum holders facing tight cash flow expanded discounts over the current-month price to RMB 40/mt to a lowest RMB 15,990/mt, quotations of other goods holders stayed above RMB 16,000/mt. In the afternoon, the SHFE current-month aluminum price moved near RMB 16,030/mt, which boosted traders’ confidence to hold prices, with deals, though sparse, mostly done between RMB 16,010-16,020/mt.

Lead

On Tuesday, SHFE lead prices opened lower at RMB 15,050/mt with pressure at the 5-day moving average. Later, prices rose slightly with domestic stocks and moved between RMB 15,150-15,200/mt. Prices finally closed at RMB 15,165/mt, up RMB 70/mt. Trading volumes decreased by 214 lots to 184 lots, and positions were down by 66 lots to 1,356 lots.

In domestic spot markets, quotations for well-known brands such as Yuguang, Chihong Zn & Ge were between RMB 15,230-15,240/mt, with premiums against SHFE 1202 lead contract prices of RMB 60-70/mt. Quotations of other brands such as Hexing were around RMB 15,200/mt. In the afternoon, prices for Hexing dropped to RMB 15,180/mt as limited deals were made. A few downstream buyers were intended to purchase, but most only made inquiries due to higher prices. Transactions were modest in general.

Zinc

On Tuesday, SHFE three-month zinc contract prices opened lower at RMB 14,600/mt and were bearish lacking direction from the LME market. As large numbers of shorts left the market, SHFE zinc prices edged up, but fell along with the Shanghai Composite Index, below the moving average. Finally, SHFE three-month zinc contract prices pared previous losses to close at RMB 14,710/mt, down RMB 15/mt. Trading volumes decreased by 120,000 lots to 249,160 lots, and total position decreased by 26,376 lots to 236,594 lots.

In domestic spot markets, #0 zinc maintained discounts between negative RMB 130-150/mt against SHFE 1203 zinc contract prices, with traded prices between RMB 14,550-14,600/mt. #1 zinc was traded between RMB 14,500-14,550/mt. Imported zinc was still RMB 170-180/mt below SHFE 1203 zinc contract prices. Downstream buying interest improved in the afternoon as SHFE zinc prices stabilized, with traded prices between RMB 14,540-14,580/mt.

Tin

The trading range of spot tin narrowed in Shanghai on Tuesday as lower-priced supply contracted further. Resistance above remains strong, however. Yunxi, Yunxiang plus small amounts of Jinlong and Nancang branded tin traded mainly between RMB 158,200-159,000/mt. Smelters’ low selling interest and weak downstream demand have been continuously narrowing the trading range. While tin prices have stabilized at the moment, the possibility for the metal to strengthen is low. Further direction is expected from LME which reopens today following the Christmas Day holiday.

Nickel

On Tuesday, mainstream traded prices of nickel from Jinchuan Group were still around RMB 130,500/mt, and mainstream traded prices of nickel from Russia were around RMB 128,200/mt, slightly down from a day earlier. Spot nickel traders could only take ex-works nickel prices from Jinchuan Group as reference when LME nickel market was closed, so spot nickel prices did not change much in recent two days. Traders were still reluctant to move goods, and downstream demand was still quiet, leaving overall trading sentiment quiet.