SMM Daily Review – 2012/1/18 Base Metals Market

SHANGHAI, Jan. 19 (SMM)--

Copper:
SHFE 1204 copper contract prices, the most active one, opened up by RMB 410/mt at RMB 59,800/mt Wednesday. SHFE three-month copper contract prices fluctuated around RMB 59,700/mt during the whole trading day, with persistent resistance at RMB 60,000/mt and testing support at the previous day’s settlement price of RMB 59,330/mt. At the tail of trading, as Chinese stock markets were down by 1.4%, and combined with large-scale position closings by long investors, SHFE three-month copper contract prices lost support immediately and slid considerably. Finally, SHFE 1204 copper contract prices ended at RMB 59,450/mt, up RMB 60/mt or 0.1%. Positions for SHFE 1204 copper contracts were up 4,274 lots, while trading volumes were down 132,000 lots. SHFE copper prices were expected to fluctuate at current levels as the Chinese New Year holiday nears, with great pressures at RMB 60,000/mt.

In the spot market, SHFE copper prices fluctuated after a high open, but copper supply, especially high-quality copper supply, decreased significantly compared with the previous day since many cargo-holders suspended sales for the Chinese New Year holiday. In this context, copper discounts fell slightly to between negative RMB 600-450/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,350-58,500/mt, and RMB 58,450-58,750/mt for high-quality copper. Speculative activity was constrained during the whole trading day, resulting in very limited market transactions in the morning business. In the afternoon session, market activity remained extremely light, and copper discounts were basically unchanged from the morning business levels. 

Aluminum:    
On Wednesday, SHFE 1204 aluminum prices opened up slightly at RMB 16,420/mt along with positive domestic news, but slid to RMB 16,320/mt in the morning session due to the lack of more favorable news and low trading sentiment ahead of the holiday. In the afternoon session, SHFE three-month aluminum prices rallied, but remained weak during the whole trading day, with prices moving below the daily moving averages, a sign of low trading activity. Finally, SHFE three-month aluminum prices closed at RMB 16,370/mt, up RMB 55/mt. Positions increased by 2,924 lots to 60,960 lots, while trading volumes fell by 5,112 lots to 15,750 lots.

In the Shanghai spot market, trading activity was extremely low, and deals were made between RMB 16,050-16,080/mt, with spot discounts between RMB 140-110/mt. Spot market confidence was dragged down by the failure of SHFE aluminum prices to move higher. Transactions were mainly made by traders, with few downstream producers.

Lead:
SHFE lead prices gapped higher at RMB 15,665/mt and moved around the moving averages on Wednesday influenced by the increasing LME lead prices. In the afternoon, SHFE lead prices edged up slightly along with LME copper prices and fluctuated between RMB 15,750-15,810/mt, with prices finally closing at RMB 15,750/mt, up RMB 120/mt. Trading volumes increased by 268 lots to 634 lots, and positions decreased by 46 lots to 1,936 lots.

In domestic spot lead markets, quotations for branded lead such as Nanfang were around RMB 15,650/mt, with discounts over the most active SHFE lead contract prices of RMB 100/mt. Other brands such as Hexing were quoted at around RMB 15,480/mt. Most traders were busy in settlements while downstream enterprises began the holiday, leaving transactions muted.

Zinc:
On Wednesday, SHFE three-month zinc contract prices opened at RMB 15,530/mt, and fluctuated between RMB 15,500-15,550/mt, dragged down by the Shanghai Composite Index. In the midday, SHFE three-month zinc contract prices touched RMB 15,590/mt, as large numbers of longs left the market ahead of the Chinese New Year holiday, prices finally closed at RMB 15,505/mt, up RMB 35/mt. Trading volumes decreased by 140,000 lots to 155,846 lots, and total position decreased by 2,562 lots to 163,906 lots.

In domestic spot markets, spot discounts were around RMB 350/mt against SHFE 1204 zinc contract prices. #0 zinc was traded between RMB 15,100-15,150/mt, and #1 zinc was traded between RMB 15,050-15,100/mt. Goods supply available in the market was imported zinc, while demand for domestic zinc improved due to favorable discounts. But the market was quiet.

Tin:
In the Shanghai tin market, trading activity was sluggish as domestic smelters showed low interest in moving goods ahead of the Chinese New Year holiday, and meanwhile many smelters, traders and downstream producers have closed for the holiday. The rare transactions were mainly made between RMB 172,000-173,000/mt, with the lack of rising momentum. Market supply was limited, highlighting low trading activity ahead of the holiday.

Nickel:
LME nickel prices advanced to certain extent after opening during the Asian trading hours on Wednesday, but pared early gains rapidly later due to decline in China's equity market and that Japan’s revised industrial output data for November was significantly lower than initial reading. Market players were pessimistically expecting the result of the Greek debt negotiation to be held on Wednesday, so it is expected that LME nickel prices may still be weighed by the European debt crisis.
 
In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were around RMB 138,500/mt, and mainstream traded prices of nickel from Russia were between RMB 137,000-137,500/mt during the morning trading hours. Traders lowered offers to promote sales amid rising demand, so mainstream traded prices of nickel from Jinchuan Group fall to RMB 138,300-138,500/mt, and mainstream traded prices of nickel from Russia were between RMB 136,800-137,300/mt. Generally speaking, demand increased from a day earlier, which was mainly due to pre-holiday stock replenishment and relatively stable performance of nickel price.