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SMM Daily Review - 2011/12/28 Base Metals Market
Dec 29,2011 09:50CST
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SHFE 1203 copper contract prices, the most active one, opened up slightly by RMB 10/mt at RMB 55,150/mt Wednesday.

SHANGHAI, Dec. 29 (SMM) –


SHFE 1203 copper contract prices, the most active one, opened up slightly by RMB 10/mt at RMB 55,150/mt Wednesday. After the opening, SHFE three-month copper contract prices temporarily lowered to test RMB 55,000/mt, but then moved higher after some investors made purchases. However, SHFE three-month copper contract prices were confronted with increasing pressures at RMB 55,500/mt since LME copper prices met resistance at below USD 7,600/mt, and began to slide after touching a high of RMB 55,560/mt. In the afternoon business, as Chinese stock markets set new record lows for the year, SHFE three-month copper contract prices retreated to fluctuate around the opening price of RMB 55,150/mt, with prices coming under pressure at the daily moving average. Finally, SHFE 1203 copper contract prices closed at RMB 55,170/mt, up RMB 30/mt or 0.05%. Positions for SHFE 1203 copper contracts were down 2,558 lots, while trading volumes were up slightly 5,252 lots. Speculative interest was waning as the year’s end nears, and SHFE copper prices felt growing pressure at the RMB 55,500/mt level.

In the spot market, copper discounts expanded further compared with the prior day levels, as cargo-holders of imported copper continued to move goods aggressively owing to tight cash flows and caused overall copper supply to remain sufficient, although SHFE copper prices fell after initially increasing and the SHFE/LME copper price ratio fell further. Copper discounts were generally reported between negative RMB 650-450/mt in the morning business. Traded prices for standard-quality copper were between RMB 55,100-55,250/mt, and RMB 55,200-55,350/mt for high-quality copper. Cargo-holders of domestic high-quality copper became less willing to sell given large overall copper discounts during the whole trading day, and only a small number of speculators took the opportunity of significant discounts for high-quality copper to enter the market, resulting in very limited market transactions. In the afternoon session, SHFE copper prices fell abruptly, but spot copper discounts just narrowed slightly to between negative RMB 550-430/mt since consumption remained weak. Traded prices declined to between RMB 55,050-55,250/mt in the afternoon business, but market activity remained very light.


SHFE aluminum for three-month delivery opened at RMB 15,875/mt and climbed to struggle near RMB 15,920/mt in the morning. Though the contract temporarily dropped below the intraday average in the afternoon, support showed at RMB 15,900/mt based on the total traded volume. Total positions of the contract lost 2,184 lots as some shorts cleared their holdings, which in turn helped transactions gain 3,962 lots to 10,244 lots. Though the most active SHFE aluminum contract saw temporary support at RMB 15,900/mt, its downside risks are high when negative news comes out.

The SHFE current-month aluminum price opened at RMB 16,000/mt and closed at RMB 16,005/mt after hitting RMB 16,060/mt, the intraday high. Transactions for the contract were only 1,416 lots. Spot aluminum was traded between RMB 16,020-16,050/mt in Shanghai, with discounts of RMB 10-40/mt over the current-month contract. The traded volume was little changed. Though the overall prices were up RMB 20/mt compared with the previous trading day, traders are still slightly bearish.


On Wednesday, SHFE 1202 lead contract prices opened lower at RMB 15,155/mt due to the lack major data and reports. SHFE lead prices gained support from buying activities at RMB 15,180/mt and moved up slightly to RMB 15,215/mt in the morning session. Later, however, prices moved between RMB 15,160-15,190/mt under pressure and finally closed at RMB 15,190/mt. Trading volumes increased by 22 lots to 206 lots, and positions were down by 60 lots to 1,296 lots.

In domestic spot markets, with the arrival of the New Year’s holiday, transactions were modest and downstream buyers were not actively building stocks. Quotations for well-known brands such as Nanfang, Chihong Zn & Ge and Chengyuan were around RMB 15,250/mt, but traded prices were mostly around RMB 15,200/mt. Prices of other brands from Yunnan Province were between RMB 15,150-15,170/mt.


On Tuesday, SHFE three-month zinc contract prices opened at RMB 14,710/mt, dipping to RMB 14,635/mt in the morning session, and touched RMB 14,795/mt as large numbers of shorts left the market with profit-taking. In the afternoon, some longs left the market, allowing SHFE three-month zinc contract prices to fall below the moving average and closed at RMB 14,755/mt, up RMB 40/mt. Trading volumes decreased by over 50,000 lots to 190,918 lots, and total position decreased by 9,194 lots to 227,400 lots.

In domestic spot markets, spot discounts were negative RMB 130/mt against SHFE 1203 zinc contract prices in the morning session, and expanded to RMB 150-170/mt in the afternoon. #0 zinc was traded between RMB 14,550-14,600/mt, while discounts of imported zinc remained between negative RMB 180-200/mt, and #1 zinc was traded between RMB 14,500-14,550/mt. Smelters were actively moving goods due to cash flow problems, with some high-end brands quoted as low as mainstream traded prices, but transactions were still muted.


Spot tin prices were stable in Shanghai on Wednesday, with Yunxi, Yunxiang and Nanshan branded tin trading between RMB 158,200-159,500/mt. Supply was limited as most smelters were unwilling to move goods. Supply at the lower end was also sparse as goods holders hiked quotations. Deals stayed light and downstream demand little improved.


On Wednesday, LME nickel prices fluctuated narrowly after opening at USD 18,590/mt during the Asian trading hours.

In China’s spot nickel market, mainstream traded prices of nickel from Jinchuan Group were between RMB 130,200-130,300/mt, and mainstream traded prices of nickel from Russia were between RMB 127,800-128,000/mt. During the afternoon trading hours, traded prices of nickel from Russia slip slightly to RMB 127,500-127,000/mt, but traded prices of nickel from Jinchuan Group were unchanged. As many traders lower prices of nickel from Russia, and since some downstream consumers entered market to replenish stocks ahead of holiday, transactions in spot nickel market improved to certain extent.


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