SMM Daily Review – 2012/2/9 Base Metals Market

SHANGHAI, Feb. 10 (SMM) –

Copper
SHFE 1204 copper contract prices opened RMB 210/mt higher at RMB 60,980/mt Thursday. After the opening, a large number of short investors closed positions. In this context, SHFE three-month copper contract prices rose after fluctuating around RMB 61,000/mt, but met resistance after reaching a high of RMB 61,880/mt near the midday, returning below the daily moving average and continuing to fluctuate. Finally, SHFE 1204 copper contract prices closed at RMB 61,070/mt, up RMB 300/mt or 0.49%. Positions for SHFE 1204 copper contracts were down 19,400 lots, and trading volumes were down 76,856 lots. The shift of the most actively-traded copper contract was basically completed in the morning session. SHFE 1205 copper contract prices reported an intraday high at RMB 62,230/mt and finally ended at RMB 61,350/mt, up RMB 240/mt or 0.39%. Position for SHFE 1205 copper contracts were down 8,118 lots, while trading volumes were up 225,000 lots. Despite upward technical indicators, SHFE copper prices faced great upside pressures over the near term, and were waiting for opportunities to break out RMB 62,000/mt.

In the spot market, cargo-holders continued to be optimistic about future copper prices as SHFE copper prices continued to rebound despite more severe fluctuations, helping copper discounts narrow between negative RMB 250-80/mt in the morning business. Traded prices for standard-quality copper were between RMB 60,250-60,700/mt, and RMB 60,350-60,850/mt for high-quality copper. Speculative activity was active during the whole trading day, and downstream producers also became more willing to purchase, resulting in brisk market activity. In the afternoon session, SHFE copper prices fell slightly, but spot copper quotations held stable, causing copper discounts to remain virtually unchanged from the morning business levels. Traded prices in the afternoon business were also basically flat with the morning session levels, but supply decreased. 

Aluminum
SHFE aluminum contract for delivery in May became the most active one in Shanghai on Thursday, as investors shift their positions backward on expectations of lower monetary loosening possibility following a rebound in January CPI. The contract closed down RMB 35/mt or 0.21% at RMB 16,285/mt facing heavy pressure at the 10-day moving average. Positions of the contract increased 2,070 lots to 51,598 lots. SMM expects the most active SHFE aluminum contract to test support at RMB 16,200/mt in face of pressures from the macro and demand side.

Spot aluminum traded between RMB 15,890-15,920/mt in Shanghai, at discounts of RMB 70-100/mt over the SHFE current-month aluminum price. Aluminum trading was slightly active but only at lower prices in the morning and mostly contributed by middlemen, after January CPI came out missing expectations and aluminum demand stays depressed. Deals were hardly seen in the afternoon, with only sparse quotations at RMB 15,890/mt being seen.

Lead
On Thursday, SHFE lead prices opened at RMB 16,110/mt and rose to touch a high of RMB 16,205/mt due to the increasing Chinese domestic stocks. At midday, however, prices dropped by as much as RMB 100/mt within 5 minutes due to the decrease of SHFE copper prices, and surrendered earlier gains. SHFE lead prices moved between RMB 16,080-16,100/mt in the afternoon and finally closed at RMB 16,080/mt, down RMB 160/mt. Trading volumes increased by 166 lots to 322 lots, and positions decreased by 152 lots to 1,718 lots.

Prices for domestic well-known brands such as Chihong Zn & Ge and Chengyuan were at RMB 15,980-16,000/mt, with discounts against the most active SHFE lead contract price at RMB 150/mt. Quotations for lead from Gejiu were rarely reported. In the afternoon, spot prices were firm, with prices for branded lead at RMB 15,950-16,000/mt and lead from Gejiu quoted at RMB 15,800/mt. Smelters were actively selling goods but downstream demand was still weak. Wait-and-see sentiment dominated spot markets with fewer transactions made compared with the previous trading day.

Zinc
On Thursday, SHFE three-month zinc contract prices opened at RMB 16,165/mt and fluctuated around the moving average in the morning session, touching RMB 16,300/mt at noon. As a large number of longs left the market with profit-taking, SHFE three-month zinc contract prices plunged to struggle between RMB 16,100-16,150/mt in the afternoon, with prices finally closing at RMB 16,145/mt, down RMB 10/mt. Trading volumes increased by over 3,000 lots to 169,556 lots, and positions decreased by 14,016 lots to 142,894 lots.

In domestic spot markets, spot discounts against SHFE three-month zinc contract prices were between RMB 300-330/mt in the morning, with #0 zinc traded between RMB 15,900-15,920/mt. Discounts narrowed slightly as SHFE zinc prices fell at noon. Discounts of #0 zinc were around RMB 280/mt, and discounts of #1 zinc were around RMB 450/mt, with traded prices between RMB 15,750-15,800/mt. Imported zinc prices were still RMB 500/mt lower than SHFE three-month zinc contract prices.

Tin
Spot tin prices stayed between RMB 177,500-181,000/mt in Shanghai on Thursday, as the Greek debt talk failure, trivial overnight gains in LME tin its losses in the morning damped market sentiment. Deals at RMB 177,000/mt were also seen, though supply at the price was quite limited. Mainstream tin brands during the day were Yunxi, Yunheng, Nanshan and Jinlong. The overall traded volume has been light due to a strong wait-and-see attitude downstream.

Nickel
During Thursday's Asian trading hours, Greek Premier Papademos announced that Greek leaders accepted all provisions for the bailout plan, excluding only one provision, which restricted LME nickel prices to fall further. During the European and the US trading hours, the European Central Bank will announce interest rate decision at 8:45 pm. Although market widely expects that interest rate will not be cut further, investors should still prepare for any unexpected outcome. At present, LEM nickel prices are between 5-day and 10-day moving average, meeting resistance to advance further and having difficulties in falling further as well. It is expected that LME nickel prices may continue to hover at high level if no solid news is available.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 145,500-146,000/mt, and mainstream traded prices of nickel from Russia were around RMB 144,500/mt during the morning trading hours. However, as LME nickel prices fell during the afternoon trading hours, a small amount of nickel from Jinchuan Group was traded at RMB 145,500/mt and a small amount of nickel from Russia was traded at RMB 140,000/mt. Supply of goods was still relatively limited in the market. Transactions were only better for a small amount low-priced goods, and were largely muted for other goods.