SMM Daily Review – 2012/1/13 Base Metals Market

SHANGHAI, Jan. 16 (SMM)--

Copper:
As LME copper prices surged overnight, SHFE 1203 copper contract prices opened up by RMB 830/mt at RMB 57,880/mt last Friday. SHFE three-month copper contract prices suffered position closings immediately after the opening, and basically fluctuated around the daily moving average of RMB 57,800/mt in the morning business, with a fluctuating band only within around RMB 300/mt and a low at RMB 57,480/mt, as Chinese stock markets closed down by 1.5%. In the afternoon business, as LME copper prices rallied to USD 8,000/mt, SHFE three-month copper contract prices climbed to RMB 58,220/mt after breaking through RMB 58,000/mt. Finally, SHFE 1203 copper contract prices closed at RMB 58,000/mt, up RMB 950/mt, or a gain of 1.67%. Positions for SHFE 1203 copper contracts were up 31,856 lots, and trading volumes were up 196,000 lots. SHFE 1204 copper prices would likely become the most actively-traded copper contracts January 16th. Technical factors would restrict SHFE copper price gains in the coming week.  

In the spot market, SHFE copper prices fluctuated after a high open, but market activity for SHFE 1201 copper contracts was active owing to the last trading day, causing spot copper supply to decease significantly. In this context, spot copper offers were quoted between discounts of negative RMB 120-20/mt in the morning business. Daily traded prices for standard-quality copper were between RMB 56,850-57,100/mt, and RMB 56,950-57,250/mt for high-quality copper. Some speculators took the opportunity of discounts to make purchases, but cargo-holders held prices firm, helping copper discounts narrow and turn to premiums at the tail of trading. Downstream producers stood on the sidelines at the highs. Overall, market transactions rose after initially falling last Friday. Copper inventories monitored by the Shanghai Futures Exchange were up 151,94mt to 120,452 mt in the week ending January 13th, an indication of very limited market transactions as the SHFE current-month copper contracts were delivered and as the Chinese New Year holiday nears. 

Aluminum:    
The most active SHFE aluminum contract for delivery in April closed RMB 5/mt or 0.03% higher at RMB 16,210/mt last Friday. The contract initially dropped to RMB 16,135/mt and rebounded with support at the 5-day moving average. Positions of the contract rose 128 lots to 54,588 lots. The metal lagged behind gains of other metals due to light trading. The most active aluminum contract is expected to hover near RMB 16,200/mt in the near term as longs and shorts get a draw. SHFE aluminum stocks climbed further by 5,303 mt to 226,927 mt on the last trading day before the delivery date.

Traded prices of spot aluminum in Shanghai were between RMB 15,960-16,000/mt last Friday, with discounts of RMB 0-40/mt over the SHFE current-month aluminum price. In the morning, the SHFE current-month aluminum price lacked rising momentum with resistance at RMB 16,000/mt. Traders in East China were busy with finishing work ahead of the Chinese New Year holiday and were not actively selling goods. Despite low downstream buying interest, aluminum prices showed some stability backed by reduced supply. Limited deals were done in the market. Deals were hardly seen in the afternoon either.

Lead:
SHFE lead prices opened higher at RMB 15,490/mt on Friday and moved between RMB 15,380-15,420/mt in the morning session. In the afternoon, SHFE lead prices fluctuated upward to the opening prices along with rising LME lead prices and finally closed at RMB 15,490/mt, up RMB 90/mt. Trading volumes increased by 80 lots to 464 lots, and positions increased by 166 lots to 1,886 lots.

In domestic spot markets, quotations for well-known brands such as Nanfang, Chihong Zn & Ge were around RMB 15,400/mt, close to SHFE 1203 lead contract prices. Other brands including Tianma were quoted around RMB 15,300/mt. In the afternoon, quotations were rarely seen. Limited inquiries were reported in the market as downstream enterprises and traders began their holiday. Transactions were relatively quiet.

Zinc:
Last Friday, SHFE 1203 zinc contract prices opened higher at RMB 15,265/mt, with prices fluctuating around the moving average during the day, and dipped to an intraday low at RMB 15,160/mt at noon. As the end of trading, SHFE 1203 zinc contract prices rose further to close at RMB 15,290/mt, up RMB 190/mt, or 1.26%, above the moving average. Trading volumes decreased by 60,000 lots to 116,710 lots, and total position decreased by 23,450 lots to 143,222 lots. SHFE 1204 zinc contract became the most actively traded, with positions increasing by 10,948 lots.
 
In domestic spot markets, SHFE three-month zinc contract prices opened higher but fell slightly at noon, and #0 zinc was traded between RMB 14,900-14,950/mt, with spot discounts between RMB 250-300/mt against SHFE three-month zinc contract prices. #1 zinc was traded between RMB 14,850-14,900/mt. Downstream buying interest did not improve despite SHFE zinc prices fell at noon, with transactions quiet. Spot discounts expanded to RMB 320/mt in the afternoon, with some traders buying spot goods and selling future contracts, but transactions did not improve.

Tin:
Goods holders successively lifted tin quotations last Friday following a surge in LME tin prices overnight. The quotation of Yunxi branded tin was lifted to RMB 175,000/mt. Deals were concluded mainly between RMB 170,000-172,000/mt, however, as downstream stock replenishments were almost finished and even as supply is tight. Most traders and downstream businesses will close this last week ahead of the Chinese New Year. SMM expects tin prices to remain stable this week supported by tight supply.

Nickel:
LME nickel prices rebounded to certain extent after a low open during Friday's Asian trading hours. Following Spanish, Italy sold EUR 4.75 billion of government bonds, including 3-year government bond and other two kinds of government bonds during the European and New York trading hours. This is the first time that investors show appetite for Spanish's long-term government bond.

Jinchuan Group raised ex-works nickel prices by RMB 2,000/mt to RMB 137,000/mt last Friday. In the Shanghai nickel spot market, traders were cautious to purchases goods amid wide price fluctuation before China's New Year holiday. Traders were reluctant to move goods and quoted offers high given the low inventories available. Mainstream offers of nickel from Jinchuan Group were around RMB 138,000, and mainstream offers of nickel from Russia were around RMB 136,000/mt.Trading sentiment was relatively quiet as neither downstream consumers nor traders showed strong interest in making transactions. In this context, transactions were not as brisk as several days earlier.