SMM Daily Review – 2012/2/7 Base Metals Market

SMM Insight 09:44:48AM Feb 08, 2012 Source:SMM

SHANGHAI, Feb. 8 (SMM) –

Copper

As LME copper prices tended to become weak overnight, SHFE 1204 copper contract prices, the most active one, opened RMB 160/mt lower at RMB 60,490/mt Tuesday. SHFE three-month copper contract prices fluctuated briefly after the opening and then fell due to resistance, with an intraday high reaching RMB 60,760/mt. As LME copper prices lowered to test support at the 10-day moving average, and as Chinese stock markets slid by 2%, SHFE three-month copper contract prices retreated more quickly and fell below the RMB 60,000/mt point in the afternoon session, but the falling momentum eased after prices were down to near RMB 59,850/mt. At the tail of trading, SHFE three-month copper contract prices pared some of the losses after gaining buying support at the lows, returning to levels near RMB 60,000/mt. Finally, SHFE 1204 copper contract prices closed at RMB 60,030/mt, down RMB 620/mt or 1.02%. Positions for SHFE 1204 copper contracts were down 4,528 lots, and trading volumes were down 20,386 lots. As long and short investors struggled at RMB 60,000/mt, support at the 10-day moving average of RMB 59,900/mt needs to be confirmed.

In the spot market, SHFE copper prices slid all the way, but cargo-holders still chose to hold back goods due to prevailing losses in hedge trading, helping copper discounts fall slightly to between negative RMB 350-150/mt in the morning business. Traded prices for standard-quality copper were between RMB 59,250-59,400/mt, and RMB 59,300-59,650/mt for high-quality copper. Traders opted to stay out of the market during the whole trading day owing to falling copper discounts, while downstream producers stuck to the sidelines since copper prices haven't fully made corrections, bringing market activity into stalemate. In the afternoon session, SHFE copper prices continued to slide, but cargo-holders showed strong reluctance to move goods at the lows, causing spot copper supply to decrease continuously. Cargo-holders of high-quality copper held offers firm, greatly spreading the price gap with standard-quality copper. Due to weak consumption, spot copper discounts failed to narrow sharply in the afternoon session, with mainstream offers reported between negative RMB 300-150/mt. Traded prices declined to between RMB 59,000-59,250/mt in the afternoon session, but deadlock in market activity sustained.    

Aluminum
The euro rebounded overnight, dragging the US dollar index to 78.488, a two-month low, as investors held high hopes for Greek debt talks. LME aluminum initially struggled at USD 2,200/mt and hit USD 2,264/mt supported by short covering after Fed President Bernanke said manufacturing recovery was inspiring. The metal regained support at the 20-day moving average and closed up USD 37/mt or 1.67% at USD 2,255/mt.

LME aluminum has been experiencing the gain-loss cycle for 9 consecutive trading days, though the mainstream traded price dropped a little bit, support below has been strong. SMM expects LME aluminum to move between USD 2,230-2,290/mt and may test USD 2,300/mt during today's trading supported by optimism towards today's Greek debt talks. The most active SHFE three-month aluminum contract is expected to open slightly higher above RMB 16,200/mt and hover between RMB 16,165-16,275/mt. The SHFE current-month aluminum price may return to RMB 16,000/mt but spot discounts should stay between RMB 50-100/mt due to weak downstream demand. Market supply will be sufficient but deals will be limited.

Lead
On Tuesday, SHFE lead prices opened slightly lower at RMB 16,190/mt and fluctuated around RMB 16,160/mt. In the afternoon, SHFE lead prices fell to move between RMB 16,050-16,100/mt due to the dropping Chinese domestic stocks, and finally closed at RMB 16,050/mt, down RMB 195/mt or 1.2%. Trading volumes decreased by 74 lots to 168 lots, and positions increased by 12 lots to 1,856 lots.

In domestic spot markets, domestic well-known brands such as Nanfang and Chihong Zn & Ge were preliminarily quoted at RMB 16,050/mt. Later, spot prices fell to around RMB 16,000/mt influenced by SHFE lead prices, with discounts against SHFE lead prices remaining at RMB 100/mt. Others including lead from Gejiu were quoted at RMB 15,900/mt. In the afternoon, SHFE lead prices continued to fall, and quotations for Nanfang were at RMB 15,900/mt. Purchases did not improve due to weak demand.

Zinc
On Tuesday, SHFE three-month zinc prices lost the RMB 16,000/mt mark at the midday due to the stalemate in Greek debt talks. In the afternoon session, the most actively traded zinc contract in the SHFE market dipped below the 5-day moving averages due to the sell-off, down to an inter-day low of RMB 15,920/mt. At the tail of trading, profit-taking helped SHFE three-month zinc prices rally slightly, with prices finally ending at RMB 16,010/mt, down RMB 170/mt or 1.05%. Trading volumes increased more than 10,000 lots to 176,214 lots, and positions were down 4,532 lots to 155,176 lots.

In the spot market, traded prices for # 0 were between RMB 15,750-15,800/mt in the morning business, with spot discounts over SHFE three-month zinc contract at RMB 350/mt. Along with falling SHFE zinc prices, spot discounts gradually narrowed to RMB 300/mt, and traded prices were around RMB 15,700/mt. Traded prices for #1 zinc were between RMB 15,600-15,650/mt, leaving no price difference compared with imported zinc. As zinc prices kept falling, downstream producers were wary of purchases, and made purchases on an as-needed basis, resulting in moderate trading sentiment. In addition, market supply was not ample on Tuesday, as spot discounts didn't narrow significantly.

Tin

The wait-and-see sentiment turned even stronger at downstream businesses after spot tin prices dropped for two consecutive days. Traders' buying interest also froze worrying slow sales. Though several smelters wanted to move goods, no inquiries were seen. Prices of Nanshan, Feidie and Yunhen branded tin for which deals were hardly struck dropped from RMB 179,500-182,500/mt in the morning to RMB 178,000-181,500/mt in the afternoon. The near term market is believed to be a bubble breaking period.

Nickel
On Wednesday's morning trading hours, LME nickel prices slipped slightly after opening, but advanced to certain extent during the afternoon trading hours as the US dollar index fell to 79. During the European trading hours, Greek leaders will hold a meeting to discuss whether or not to accept the stern reform measures proposed by IMF. Although risk aversion sentiment grew due to the Greek debt crisis, it is expected that LME nickel prices will not fluctuate much amid strong wait-and-see sentiment before outcome the meeting. In other news, the France will announce December trade data and the Germany will release December industrial output.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 145,500-145,800/mt, and mainstream traded prices of nickel from Russia were between RMB 144,200-144,500/mt during the morning trading hours. As LME nickel prices slipped and market demand was lackluster, traders cut prices during the afternoon trading hours, with mainstream traded prices of Jinchuan nickel at RMB 145,000/mt and mainstream traded prices of Russian nickel between RMB 143,800-144,000/mt. Market sentiment was extremely bearish, and trading sentiment was muted.

 

SMM Daily Review – 2012/2/7 Base Metals Market

SMM Insight 09:44:48AM Feb 08, 2012 Source:SMM

SHANGHAI, Feb. 8 (SMM) –

Copper

As LME copper prices tended to become weak overnight, SHFE 1204 copper contract prices, the most active one, opened RMB 160/mt lower at RMB 60,490/mt Tuesday. SHFE three-month copper contract prices fluctuated briefly after the opening and then fell due to resistance, with an intraday high reaching RMB 60,760/mt. As LME copper prices lowered to test support at the 10-day moving average, and as Chinese stock markets slid by 2%, SHFE three-month copper contract prices retreated more quickly and fell below the RMB 60,000/mt point in the afternoon session, but the falling momentum eased after prices were down to near RMB 59,850/mt. At the tail of trading, SHFE three-month copper contract prices pared some of the losses after gaining buying support at the lows, returning to levels near RMB 60,000/mt. Finally, SHFE 1204 copper contract prices closed at RMB 60,030/mt, down RMB 620/mt or 1.02%. Positions for SHFE 1204 copper contracts were down 4,528 lots, and trading volumes were down 20,386 lots. As long and short investors struggled at RMB 60,000/mt, support at the 10-day moving average of RMB 59,900/mt needs to be confirmed.

In the spot market, SHFE copper prices slid all the way, but cargo-holders still chose to hold back goods due to prevailing losses in hedge trading, helping copper discounts fall slightly to between negative RMB 350-150/mt in the morning business. Traded prices for standard-quality copper were between RMB 59,250-59,400/mt, and RMB 59,300-59,650/mt for high-quality copper. Traders opted to stay out of the market during the whole trading day owing to falling copper discounts, while downstream producers stuck to the sidelines since copper prices haven't fully made corrections, bringing market activity into stalemate. In the afternoon session, SHFE copper prices continued to slide, but cargo-holders showed strong reluctance to move goods at the lows, causing spot copper supply to decrease continuously. Cargo-holders of high-quality copper held offers firm, greatly spreading the price gap with standard-quality copper. Due to weak consumption, spot copper discounts failed to narrow sharply in the afternoon session, with mainstream offers reported between negative RMB 300-150/mt. Traded prices declined to between RMB 59,000-59,250/mt in the afternoon session, but deadlock in market activity sustained.    

Aluminum
The euro rebounded overnight, dragging the US dollar index to 78.488, a two-month low, as investors held high hopes for Greek debt talks. LME aluminum initially struggled at USD 2,200/mt and hit USD 2,264/mt supported by short covering after Fed President Bernanke said manufacturing recovery was inspiring. The metal regained support at the 20-day moving average and closed up USD 37/mt or 1.67% at USD 2,255/mt.

LME aluminum has been experiencing the gain-loss cycle for 9 consecutive trading days, though the mainstream traded price dropped a little bit, support below has been strong. SMM expects LME aluminum to move between USD 2,230-2,290/mt and may test USD 2,300/mt during today's trading supported by optimism towards today's Greek debt talks. The most active SHFE three-month aluminum contract is expected to open slightly higher above RMB 16,200/mt and hover between RMB 16,165-16,275/mt. The SHFE current-month aluminum price may return to RMB 16,000/mt but spot discounts should stay between RMB 50-100/mt due to weak downstream demand. Market supply will be sufficient but deals will be limited.

Lead
On Tuesday, SHFE lead prices opened slightly lower at RMB 16,190/mt and fluctuated around RMB 16,160/mt. In the afternoon, SHFE lead prices fell to move between RMB 16,050-16,100/mt due to the dropping Chinese domestic stocks, and finally closed at RMB 16,050/mt, down RMB 195/mt or 1.2%. Trading volumes decreased by 74 lots to 168 lots, and positions increased by 12 lots to 1,856 lots.

In domestic spot markets, domestic well-known brands such as Nanfang and Chihong Zn & Ge were preliminarily quoted at RMB 16,050/mt. Later, spot prices fell to around RMB 16,000/mt influenced by SHFE lead prices, with discounts against SHFE lead prices remaining at RMB 100/mt. Others including lead from Gejiu were quoted at RMB 15,900/mt. In the afternoon, SHFE lead prices continued to fall, and quotations for Nanfang were at RMB 15,900/mt. Purchases did not improve due to weak demand.

Zinc
On Tuesday, SHFE three-month zinc prices lost the RMB 16,000/mt mark at the midday due to the stalemate in Greek debt talks. In the afternoon session, the most actively traded zinc contract in the SHFE market dipped below the 5-day moving averages due to the sell-off, down to an inter-day low of RMB 15,920/mt. At the tail of trading, profit-taking helped SHFE three-month zinc prices rally slightly, with prices finally ending at RMB 16,010/mt, down RMB 170/mt or 1.05%. Trading volumes increased more than 10,000 lots to 176,214 lots, and positions were down 4,532 lots to 155,176 lots.

In the spot market, traded prices for # 0 were between RMB 15,750-15,800/mt in the morning business, with spot discounts over SHFE three-month zinc contract at RMB 350/mt. Along with falling SHFE zinc prices, spot discounts gradually narrowed to RMB 300/mt, and traded prices were around RMB 15,700/mt. Traded prices for #1 zinc were between RMB 15,600-15,650/mt, leaving no price difference compared with imported zinc. As zinc prices kept falling, downstream producers were wary of purchases, and made purchases on an as-needed basis, resulting in moderate trading sentiment. In addition, market supply was not ample on Tuesday, as spot discounts didn't narrow significantly.

Tin

The wait-and-see sentiment turned even stronger at downstream businesses after spot tin prices dropped for two consecutive days. Traders' buying interest also froze worrying slow sales. Though several smelters wanted to move goods, no inquiries were seen. Prices of Nanshan, Feidie and Yunhen branded tin for which deals were hardly struck dropped from RMB 179,500-182,500/mt in the morning to RMB 178,000-181,500/mt in the afternoon. The near term market is believed to be a bubble breaking period.

Nickel
On Wednesday's morning trading hours, LME nickel prices slipped slightly after opening, but advanced to certain extent during the afternoon trading hours as the US dollar index fell to 79. During the European trading hours, Greek leaders will hold a meeting to discuss whether or not to accept the stern reform measures proposed by IMF. Although risk aversion sentiment grew due to the Greek debt crisis, it is expected that LME nickel prices will not fluctuate much amid strong wait-and-see sentiment before outcome the meeting. In other news, the France will announce December trade data and the Germany will release December industrial output.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 145,500-145,800/mt, and mainstream traded prices of nickel from Russia were between RMB 144,200-144,500/mt during the morning trading hours. As LME nickel prices slipped and market demand was lackluster, traders cut prices during the afternoon trading hours, with mainstream traded prices of Jinchuan nickel at RMB 145,000/mt and mainstream traded prices of Russian nickel between RMB 143,800-144,000/mt. Market sentiment was extremely bearish, and trading sentiment was muted.