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SMM Daily Review – 2012/2/3 Base Metals Market
Feb 6,2012 09:36CST
smm insight
SHFE 1204 copper contract prices opened RMB 360/mt lower at RMB 59,500/mt Friday, and the most active SHFE aluminum contract prices moved between RMB 16,190-16,230/mt.

SHANGHAI, Feb. 6 (SMM) –

As LME copper prices remained weak overnight, SHFE 1204 copper contract prices, the most active one, opened RMB 360/mt lower at RMB 59,500/mt Friday, and fluctuated around this price mark after the opening. Short investors then made profit-taking, helping SHFE three-month copper contract prices move higher. In the afternoon business, as Chinese stock markets reversed declines and increased by 1%, and as LME copper prices rallied to near USD 8,400/mt, SHFE three-month copper contract prices rose but still met resistance at RMB 60,000/mt. Owing to position closings at the tail of trading, SHFE three-month copper contract prices lost support and retreated to early trading session levels, with an intraday high at RMB 60,060/mt. Finally, SHFE 1204 copper contract prices closed at RMB 59,820/mt, down RMB 40/mt or 0.07%. Positions for SHFE 1204 copper contracts were down 9,568 lots, and trading volumes were down 90,464 lots. SHFE copper prices would continue to fluctuate due to great pressures at the 5- and 10-day moving averages. 

In the spot market, as SHFE copper prices moved higher after a low open, buying activity for spot copper was brisk at low price levels in the morning business. Cargo-holders, though, had no intention of selling aggressively due to expectations about improvement in copper consumption next week, and narrowed copper discounts to between negative RMB 320-180/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,700-58,900/mt in the morning business, and RMB 58,780-59,050/mt for high-quality copper. Both downstream producers and traders appeared more willing to buy during the whole trading day, helping market activity become the most active following the Chinese New Year holidays. In the afternoon session, although SHFE copper prices fluctuated at high levels, spot copper discounts were virtually unchanged from the morning business levels, while traded prices rose to between RMB 58,900-59,100/mt. Trading sentiment in the afternoon business was lower than that in the morning session. Copper inventories monitored by the Shanghai Futures Exchange increased by 48,246mt to 179,891 mt in the week ending February 3rd, highlighting sluggish consumption due to the Chinese New Year holiday, which would restrict copper prices over the near term.   

The most active SHFE aluminum contract for delivery in April moved between RMB 16,190-16,230/mt and closed at RMB 16,190/mt last Friday, down RMB 70/mt or 0.43% from the previous day. In the face of weak aluminum consumption following the Chinese New Year, large domestic suppliers successively entered the futures market, pushing SHFE aluminum stocks 46,078 mt higher to 283,503 mt and dragging SHFE aluminum prices lower. SMM expects the most active SHFE aluminum contract to seek support at RMB 16,100/mt first.
Spot aluminum traded between RMB 15,910-15,930/mt in Shanghai, with discounts of RMB 60-90/mt over the SHFE current-month aluminum price. Goods holders' selling interest dropped sharply and held quotations above RMB 15,900/mt when the current-month SHFE aluminum price was pressured at RMB 16,000/mt, narrowing spot discount to within RMB 100/mt. Purchases from downstream were rarely seen, however, with only inquiries from a few middlemen. Aluminum demand may pick up after the Lantern Festival when most businesses fully resume operation.

On Friday, SHFE lead prices opened RMB 100/mt lower at RMB 15,990/mt influenced by LME lead price, and then rose to RMB 16,100/mt with pressure at the 5-day moving average. In the afternoon, prices continued to increase and stood above the 16,100/mt level to finally close at RMB 16,145/mt, up RMB 20/mt. Trading volumes increased by 214 lots to 312 lots, and positions increased by 46 lots to 1,904 lots.

In domestic spot markets, prices changed little from the previous trading day and transactions were modest as market players were cautious ahead of weekend. Quotations for well-known brands such as Nanfang and Chengyuan were between RMB 15,930-15,950/mt, with discounts against the most active SHFE lead contract price at RMB 150/mt. Prices for lead from Gejiu were between RMB 15,750-15,780/mt. In the afternoon, spot market remained quiet, traders were not willing to sell goods due to bullish market outlook.


SHFE three-month zinc contract prices climbed to near RMB 16,000/mt due to entrance of long investors after fluctuating between RMB 15,800-15,850/mt briefly in the morning session, but later prices faced strong short selling pressures at RMB 16,000/mt, and prices mainly struggling around RMB 16,000/mt in the midday. Long buying again pushed up SHFE zinc prices in the afternoon session, with prices even hitting RMB 16,065/mt. As most short investors exited the market after profit-taking at the end of trading, SHFE three-month zinc contract prices lost previous gains and finally closed at RMB 15,955/mt, up RMB 80/mt. Trading volumes fell by 40,000 lots to 232,962 lots, while positions decreased by 3,586 lots to 163,972 lots.

In the spot market, as SHFE three-month zinc contract prices climbed to near RMB 16,000/mt, domestic #0 zinc was traded at discounts between RMB 320-350/mt over SHFE three-month zinc contract prices, between RMB 15,600-15,650/mt. Imported zinc was quoted at discounts of RMB 420-450/mt, while quotations for #1 zinc were flat with imported zinc. Widening discounts improved trader interest in arbitrage activity, and most deals in the spot market were made by traders, with downstream buying very limited.

Spot tin prices dropped further in Shanghai last Friday, due to  losses in LME tin prices overnight, weak support at USD 24,000/mt and quite low domestic buying interest downstream. Yunxiang and Jinlong branded tin traded mainly between RMB 181,000-182,000/mt while Yunxi and Yunheng branded tin ingots mostly struck deals between RMB 183,000-184,000/mt. Deals for higher quotations were hardly reached and traded volumes were light. More upstream and downstream tin businesses will return to the market following the Lantern Festival, by then tin supply and demand may turn normal. However, as many downstream businesses already stocked up before the Chinese New Year, a sharp increase in tin supply may pose pressure on tin prices.

Mainstream traded prices of nickel were between RMB 142,800-143,000/mt and RMB 141,500-141,800/mt for Jinchuan nickel and Russian nickel respectively in Shanghai last Friday. Nickel prices were little changed during Asian trading hours of the day. Some traders replenished stocks in small amounts as nickel prices dropped and with expectations of nickel purchases from downstream after the Lantern Festival. The overall traded volume stayed light, however.

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