SMM Daily Review - 2012/1/19 Base Metals Market

SHANGHAI, Jan. 20 (SMM) –

Copper

SHFE 1204 copper contract, the most active one, opened up by RMB 280/mt at RMB 59,970/mt Thursday. SHFE three-month copper contract prices broke through 2.5-month high to hit RMB 60,620/mt due to brief entry of longs and 1.3% increase in China’s stock market. However, SHFE three-month copper contract price fell below RMB 60,000/mt mark to a low of USD 59,910/mt owing to short pressure during the afternoon trading hours. Finally, SHFE three-month copper contract price closed at 60,560/mt, up RMB 870/mt or up 1.46% from a day earlier. Positions for SHFE 1204 copper contracts were down 7,330 lots, while trading volumes were up 35,922 lots. Total positions for SHFE copper contracts were down 21,134 lots, an indication that speculators exited market to avoid risk before China’s New Year holiday. SHFE copper prices have advanced steadily recently, with low-end price climbing as well. Technically speaking, SHFE three-month copper contract prices are pointing to RMB 61,000/mt mark.

In the spot market, supply of spot copper reduced to great extent as some arbitrage cargo-holders had difficulties in moving goods amid unchanged price spread and since many players exited market as the Chinese New Year holiday neared. During the noon trading hours, there was almost no supply of spot copper, so copper discounts narrowed to be negative RMB 550-350/mt. Traded prices for standard-quality copper were between RMB 59,250-59,400/mt, and RMB 59,350-59,600/mt for high-quality copper, with supply and demand both sluggish in the market. During afternoon trading hours, SHFE copper prices returned to normal level, so copper discount were between negative RMB 450-300/mt, but traded prices were lower than those in morning trading hours.

Aluminum

SHFE 1204 aluminum prices, the most actively traded contract, opened at RMB 16,360/mt on Thursday, and dropped to RMB 16,330/mt in the morning session due to weak market fundamentals. In the afternoon session, SHFE three-month aluminum prices erased morning losses due to rising stocks prices, with prices finally closing at RMB 16,365/mt, down RMB 10/mt or 0.06% from a day earlier. Trading volumes for SHFE three-month aluminum contract prices were only 6,978 lots, and positions were down by 1,436 lots to 59,524 lots. Trading activity was low ahead of the Chinese New Year holiday.

On Thursday, SHFE current-month aluminum prices narrowly fluctuated in the RMB 16,140-16,210/mt range, with prices opening at RMB 16,190/mt and closing at RMB 16,195/mt, up RMB 5/mt from a day earlier. Trading volumes for SHFE current-month aluminum contract prices were 1,960 lots, and positions were down by 1,196 lots to 26,226 lots, a sign of cash withdrawal before the holiday. In the Shanghai spot market, traded prices averaged between RMB 16,060-16,080/mt, with discounts over SHFE current-month aluminum between RMB 140-100/mt. Quotations from cargo-holders were mixed. Those, who were eager to generate cash, cut prices slightly, while those with strong unwillingness to move goods, held offers firm above RMB 16,060/mt. In general, overall trading activity was lackluster before the holiday.

Lead

SHFE lead prices opened RMB 130/mt higher at RMB 15,885/mt on Thursday and rose to move between RMB 15,880-15,960/mt. At the tail of trading, SHFE lead prices moved up further due to the rising domestic stocks and finally closed at RMB 16,000/mt, up RMB 250/mt, or 1.59%. Trading volumes increased by 80 lots to 714 lots, and positions increased by 116 lots to 2,052 lots.

In domestic spot markets, quotations were rarely reported ahead of the holiday. Well-known brands such as Nanfang and Jinsha were quoted between RMB 15,750-15,800/mt, with discounts over the most active SHFE lead contract prices of RMB 100-150/mt. Other brands such as Hexing were quoted at RMB 15,750/mt. However, lead-acid battery producers were still cautious given unclear market outlook and the sudden surge during these two days. Besides, most enterprises have been in holiday, few transactions were made on Thursday.

Zinc

On Thursday, the most active SHFE zinc contract prices remained at a high level and opened slightly higher at RMB 15,570/mt. Prices then moved up above RMB 15,600/mt and touched a high of RMB 15,720/mt. At midday, SHFE zinc prices plunged below moving averages, surrendering some earlier gains, with prices finally closing at RMB 15,660/mt, up RMB 140/mt. As the Chinese New Year approaches, transactions were quiet, trading volumes were down more than 10,000 lots to 149,958 lots, positions decreased by 13,010 lots to 150,896 lots.

In domestic spot markets, spot discounts over the most active SHFE zinc contract prices expanded to RMB 400-450/mt but later narrowed to RMB 420/mt with the slump in SHFE zinc prices. Traded prices for #0 zinc were between RMB 15,200-15,250/mt, and traded prices for #1 zinc were between RMB 15,150-15,200/mt. The expanding discounts caused some arbitrage operations, but deals were scarce as domestic zinc was rarely seen in the markets.

Tin

In Shanghai tin markets, trading volumes decreased further, with only a few transactions mainly done between RMB 172,000-173,000/mt. Both sellers and buyers began the holidays, leaving markets rather quiet.

Nickel

LME nickel fluctuated narrowly after opening during the Asian trading hours on Thursday.  The euro zone will have the most critical long-term debt demand test on Thursday nigh. In addition, Spanish and France will issue EUR 14 billion government bond, and market players were relatively optimistic towards debt issue result duet o European Central Bank’s financial support and relatively high yields rate of government bond. What’s more, the Greek debt negotiation is underway. Officials from IMF, European Central Bank and European Union will arrive to Athens on Friday to discuss rescue plan for possible default of Greek debt. In general, market sentiment was relatively optimistic as European leaders were actively solving its debt crisis.

In the Shanghai nickel spot market, mainstream offers of nickel from Jinchuan Group were in the RMB 138,500-139,000/mt range, and mainstream offers of nickel from Russia were around RMB 137,500/mt.Since offers were relatively high, some traders slightly cut offers to promote sales. In this context, traded prices of nickel from Jinchuan Group were between RMB 138,500-138,600/mt and mainstream traded prices of nickel from Russia were between RMB 137,300-137,500/mt range.