SMM Daily Review - 2012/2/2 Base Metals Market

SHANGHAI, Feb. 3 (SMM) --

Copper

As LME copper prices pared losses overnight, SHFE 1204 copper contract prices, the most active one, opened RMB 190/mt higher at RMB 60,000/mt Thursday. After the opening, SHFE three-month copper contract prices still suffered selling pressures from short investors at above RMB 60,000/mt, and therefore slipped rapidly after fluctuating around the price mark briefly. In the afternoon session, as Chinese stock markets stood steadily at 2,300 points and closed 2% higher, SHFE three-month copper contract prices gained support at around the 10-day moving average of RMB 59,500/mt, and rallied to around RMB 60,000/mt at the tail of trading, with an intraday low at RMB 59,520/mt. Finally, SHFE 1204 copper contract prices closed at RMB 59,880/mt, up RMB 70/mt or 0.12%. Positions for SHFE 1204 copper contracts were down 3,720 lots, while trading volumes were up 32,168 lots. SHFE copper prices were likely to remain weak due to the weakening bullish sentiment.

In the spot market, as SHFE copper prices continued to move lower after a high open, cargo-holders were reluctant to trade at prevailing discounts. Besides, copper importers became unwilling to move goods owing to the falling SHFE/LME copper price ratio, while domestic suppliers, especially standard-quality copper suppliers, also refused to offer big discounts given no cash flow pressures. In this context, spot copper supply decreased, and quotations for copper discounts fell slightly to between negative RMB 350-200/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,700-58,900/mt, and RMB 58,800-59,100/mt for high-quality copper. Traders lacked interest in buying due to no speculative room, while downstream producers stuck to the sidelines since SHFE copper prices just fell slightly, resulting in limited market transactions in the morning session. In the afternoon business, as SHFE copper prices rallied from the lows, mainstream quotations for spot copper discounts increased to between negative RMB 350-200/mt, but traded prices were basically unchanged from the morning business levels. 

Aluminum

The most active SHFE aluminum contract for delivery in April opened slightly higher and closed up RMB 25/mt or 0.15% higher at RMB 16,270/mt on Thursday supported by short covering following afternoon gains in the Shanghai Composite Index. Transactions stayed below 10,000 lots as longs and shorts exerted nearly equal influence in the market. The contract is expected to stay near present levels and gather upward momentum to challenge the RMB 16,300/mt mark.

Spot aluminum was traded mainly between RMB 15,920-15,950/mt in Shanghai, with discounts of RMB 90-110/mt over the SHFE current-month aluminum price. In the morning, the SHFE current-month aluminum price dropped continually to RMB 16,000/mt. Entering February, as downstream demand stays weak and discounts hold near RMB 100/mt, most traders prefer arbitrages in the futures and spot markets. Rare participation of both suppliers and buyers in the spot market on the one hand inhibited losses in aluminum prices and led to an extremely light trading volume on the other. Spot quotations were lifted to near RMB 16,000/mt in the afternoon supported by gains in the Shanghai Composite Index. Buying interest of middlemen slightly improved but supply below RMB 15,950/mt was rarely seen. Only a few deals were done at RMB 15,980/mt in the afternoon due to low interest for higher-priced goods.

Lead

On Thursday, SHFE lead prices rose after opening at RMB 16,130/mt, but then fell to fluctuate around RMB 16,050/mt influenced by decreasing LME lead prices. In the afternoon, as Chinese domestic stocks stopped falling and regained some earlier losses, SHFE lead prices closed at RMB 16,125/mt, up RMB 130/mt. Trading volumes decreased by 214 lots to 98 lots, and positions increased by 16 lots to 1,858 lots.

In domestic spot markets, transactions were still quiet. Smelters sold goods in limited amounts, while downstream enterprises which resumed production mainly consumed inventories built ahead of the holiday, leaving low buying interest. Quotations for well-known brands such as Chihong Zn&Ge, Nanfang and Chengyuan were between RMB 15,920-15,950/mt. Other brands including Hexing were quoted at around RMB 15,750/mt. In the afternoon, despite the slight increase in LME lead prices, some traders cut prices for lead from Gejiu by RMB 20/mt due to sparse transactions.

Zinc

Boosted by strong LME zinc prices, SHFE three-month zinc contract prices briefly climbed to a high of RMB 15,970/mt after opening, but later prices gradually lost the 5-day moving average following declines in LME zinc prices, with prices even dipping to an intraday low of RMB 15,775/mt in the midday. In the afternoon session, bullish performance of domestic stocks helped drive up SHFE three-month zinc contract prices, with prices even returning to above the 5-day moving average and finally closing at RMB 15,945/mt, up RMB 50/mt. Trading volumes increased by nearly 50,000 lots to 271,734 lots, while positions increased by 7,690 lots to 167,558 lots.

In the spot market, spot discounts narrowed gradually from RMB 350/mt, to RMB 260-280/mt as SHFE three-month zinc contract prices fell continuously. #0 zinc was traded around RMB 15,550/mt, while imported zinc was quoted at discounts of RMB 400-420/mt. #1 zinc was traded between RMB 15,500-15,550/mt, with most deals made at the low-end. Zinc prices had fallen for two consecutive days, spurring market cautiousness and in turning resulting in light trading.

Tin

Tin prices dropped further in the Shanghai market on Thursday, with Feidie and Jinlong branded tin trading mainly between RMB 183,000-184,000/mt while Yunxi and Yunheng branded tin striking deals mostly between RMB 184,000-185,000/mt. The overall trading volume stayed light as many downstream businesses already stocked up before the Chinese New Year and by virtue of relatively big gains in tin prices. The metal saw losses during the day as a result of weak demand even supply stayed tight.

Nickel

During Thursday’s Asian trading hours, LME nickel prices advanced after opening at USD 21,085/mt, drawing support from domestic stock market’s rebounding to 2,300 points, and struggled around 5-day moving average during the afternoon trading hours. During Thursday’s European trading hours, the US will announce non-farm employment data for Q4 2011 and last week’s seasonally adjusted initial jobless claim. The US dollar index slipped to certain extent during Chinese New Year holiday, and other economic data from the US was not inspiring. It is expected the to-be-announced non-farm employment data and initial jobless claim will be vital indicators measuring the US economy, which will affect movement of the US dollar and LME nickel prices.  It is expected that market will take clue from the US economic data.

Jinchuan Group cut ex-works nickel prices by RMB 4,000/mt to RMB 145,000/mt on Thursday. In China’s nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 143,800-144,000/mt, and mainstream traded prices of nickel from Russia were between RMB 142,000-142,500/mt. After Jinchuan Group cut its ex-works nickel prices, a small amount of nickel at RMB 143,500/mt was supplied in the market, but the limited trading volume failed to affect mainstream traded prices. Prices of domestic nickel were lower than LME nickel, which was mainly due to the fact that some traders still had profits available even if they moved goods lower than Jinchuan Group’s ex-works prices amid LME nickel price rally during Chinese New Year holiday. Overall trading sentiment was still not brisk in spot nickel market. According to market players, some downstream producers will replenish stocks in the following week, and overall trading volume will increase by then.